Author Topic: 457b rollover questions am I thinking this right?  (Read 613 times)

Silrossi46

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457b rollover questions am I thinking this right?
« on: January 14, 2022, 02:50:17 PM »
I have a governmental 457b that I am currently contributing double catch-up  max to.   I will be leaving the government job likely within the next three years.  Could be in one year or could be 3. My question is I am currently age 51 and at the oldest I would be 54 when leaving.   Understanding that the government 457b has the option of withdrawing the funds penalty free at any age upon separation of employment if I roll it over to a vanguard ira I would essentially be losing at worst the ability to withdraw from the 457b penalty free from age 51-59.5 or if at 54 then from 54-59.5. 

The fees in the 457b are not that great.   Range of .40 to .67

My point is if I have enough in my vanguard taxable to cover any withdrawals I need from 51 (or 54) to 59.5 then need I really be worried about the 457b benefit?   I can just roll it over to a vanguard ira and start any withdrawals from taxable as needed.

Vanguard taxable = 450,000 vtsax
457b = 710,000 small caps large caps and s&p 500 index
Paid off home 650k
Medical covered fully in retirement by employer

Planned retirement expenses are 90,000/year.  In previous posts I indicate a much less spend and I realize that 90k is a big spend but I am planning for potential relationship changes and also I live in a hcol area with property taxes alone in the 14,000 per year range on a 650k home. (That I must continue to maintain)  SS income will be 2200/ year at 62.

Pension at 54 will cover 70,000 a year non cola adjusted before taxes.
am I thinking of this correctly?  I see no reason to leave the funds there and allow them to incur the fees.

Essentially I would have at the time of leaving the job 1,200,000 in vanguard split between ira and taxable and 70,000 pension yearly and SS kicking in at 62.

The scenario never fails in cfiresim.  I provided a ton more information maybe than required but the question is move the 457b to vanguard ira or not?   Would I be hit with the same rmd’s in a 457b vs an ira down the line? 

Any advice and comments and face punches are always welcome.  Thanks!

Wintergreen78

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Re: 457b rollover questions am I thinking this right?
« Reply #1 on: January 15, 2022, 09:51:17 AM »
It seems like you’ve thought through the scenario pretty well. It seems pretty unlikely you would find yourself in a situation where you need to withdraw anything before 59.5.

I would feel pretty comfortable transferring that to an IRA in your position.

seattlecyclone

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Re: 457b rollover questions am I thinking this right?
« Reply #2 on: January 15, 2022, 11:52:35 AM »
Yeah it sounds like you probably wouldn't need to make a 457 withdrawal prior to age 60. If you have any doubts on that point you could do a partial rollover, moving most of the 457 money into an IRA and leaving part of it in there just in case you want to do an early withdrawal.

Silrossi46

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Re: 457b rollover questions am I thinking this right?
« Reply #3 on: January 15, 2022, 11:57:58 AM »
Thank you Seattle.  That is something i did not consider.  That could be a possibility maybe leaving a small portion in the 457b.

DaTrill

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Re: 457b rollover questions am I thinking this right?
« Reply #4 on: January 15, 2022, 12:52:31 PM »
Do you have 403b or deferred compensation that might provide lower fees?  The only state program I've seen that does not hide fees deep in the plan documents is Fidelity and recently Empower has made their fees less absurd in some programs.  Fees at Empower to just hold Vanguard funds were well over $200/year now $18/year.  I've seen plans that charge $1000's to just hold other firms' funds, which also have a fee.   

Silrossi46

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Re: 457b rollover questions am I thinking this right?
« Reply #5 on: January 15, 2022, 01:10:37 PM »
@DaTrill we have nationwide and valic. I believe that there are the same in that they hide the fees just as you describe.  I have spoken to our finance department and hr department who manage the programs.   They are essentially clueless and most do not even take advantage of the 457b plan.  They see it as a management layer they do not want to even be involved in.  The general consensus is that “we have a pension who cares about a 457b plan”.  The reason for me approaching them was to see about lowering fees and offering more investment options.   I believe the politics in governmental offerings by these companies runs deep.   It’s a mess that I feel I want out of upon leaving.   That being said maybe my option is just leave some in the plan as Seattle stated just in case I need it per say. 

DaTrill

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Re: 457b rollover questions am I thinking this right?
« Reply #6 on: January 16, 2022, 01:23:33 PM »
The extra fees are disclosed DEEP in the state plan documents.  Most state investment boards are filled with HR and admin morons from the education systems, not one person with any Finance experience or knowledge and would struggle to pass an 8th grade math exam.  I worked in Finance and educated in all levels of Finance and once tried to improve a state's retirement plan options to match those of neighboring states.  Was met with intense resistance and bizarre accusations. 

State had hired a corrupt firm to "monitor" investment options and was receiving "referral fees" from investment companies for keeping fees high in the state plans.  Appointing/electing dumb people to make complex decisions results in these terrible plans being maintained.  The plan I was in was costing $500 in the first year, $1100 second year, $1800 third year, basically $500 + $100*(year) cumulating each year due to total incompetence, idiocy and greed.  Sadly, these are usually the same people in charge of investing pension money and results are predictable.     

All you can do is try to determine who is responsible for making these decisions (difficult), hope there is one intelligent person on the board (5%) with even a minimal amount of Finance background (5%) and appeal to their intelligence.           

Silrossi46

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Re: 457b rollover questions am I thinking this right?
« Reply #7 on: January 16, 2022, 01:36:34 PM »
@DaTrill well said.   Thank you. I will move the money out (or at least most of it) upon leaving the system. I will move it to a vanguard ira where I have all of my taxable money.  I will use my taxable money to balance the time between when I leave to 59.5 to compliment my monthly pension income as needed. 

FLBiker

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Re: 457b rollover questions am I thinking this right?
« Reply #8 on: January 17, 2022, 06:31:48 AM »
Can you say more about how these fees are hidden?  I have a 457b with Nationwide, and (from what I'm seeing) the fees look pretty good.

I've got VTSNX with a fee of .08, and VINIX with a fee of .035.  In addition, I see a monthly fee for ~$8 (on a $138K investment), so it looks like I pay an additional .07 in fees to Nationwide.  Is there anywhere else I should be looking for hidden fees?  If not, I think I can live with this, since I'm 45 and will likely want to use some of this money before I'm 59.5.