457(b) Conversion to IRA/Roth IRA

Submitted by Stuart Alpern on Mon, 2023-02-06 23:33

My issue to clarify is with two 457(b) plans where I’ve retired from both local gov’ts and I’m 65 years old.
If I convert these through a conversion from the 457(b)s to ending up in a perhaps newer Roth IRA(as I have several Roth IRA’s from contributions in the late 1990’s) is there a 5 year rule for distributions/withdrawals from these new Roth IRA’s from the 457(b) plans subjecting me to 10% penalty tax?



Submitted by David Mertz on Tue, 2023-02-07 00:31

  • There is no 10% early-distribution penalty for a distribution from a Roth IRA after age 65.
  • Because you have met the age requirement and the 5-year requirement for qualified Roth IRA distributions, distributions you take from your Roth IRAs, including distributions of converted funds, is also free of any income tax.


Submitted by Stuart Alpern on Mon, 2023-02-13 21:59

My llatest  issue to clarify is with two 457(b) plans where I’ve retired from both local gov’ts and I’m 65 years old. My Joint return likely will have income  that exceeds $238.000.  I don’t think Conversions from a 457(b) are subject to such AGI limits but I’m not positive.If I convert these through a conversion from the 457(b)s to ending up in a perhaps newer Roth IRA(as I have several Roth IRA’s from contributions in the late 1990’s) is there a 5 year rule for distributions/withdrawals from these new Roth IRA’s from the 457(b) plans subjecting me to 10% penalty tax?



Submitted by Alan - IRA critic on Mon, 2023-02-13 22:24

No tax or penalty on any of your Roth IRA distributions because your Roth are already fully qualified. You can add to them by conversions and the conversion funds become instantly qualified and tax and penalty free whether you add them to existing Roth IRA or open more new Roth accounts. All your Roth accounts are treated as one combined qualified Roth IRA for tax purposes. You are eligible to convert as much as you want but they will add to your other taxable income, so you need to control the amount converted so that your marginal rate does exceed what you expect it to be later in retirement. Of course, every dollar you convert will reduce your account balance that will be subject to RMDs at age 73. Also, be aware of the IRMAA surcharged premium tiers under which your MAGI for 2023 (from conversions and other income) will affect your Medicare premiums in 2025. 



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