Author Topic: Found "Loop Hole" in 457 Plan  (Read 1112 times)

Peter Parker

  • Stubble
  • **
  • Posts: 162
Found "Loop Hole" in 457 Plan
« on: September 29, 2017, 08:21:23 AM »
I haven't always been Mustachian....Found out about this lifestyle a little late so doing my best to "catch-up." 

Under my employer's 457 Plan one can normally deduct 18K per year.  However if you are 50 plus, that can to go to 24K per year.  BUT here's the "loop hole:" 

For those that haven't fully contributed over the course of their employment, you may be entitled to a "3-YEAR PRE-RETIREMENT CATCH UP PROVISION" in which you may be able to contribute UP TO $36,000 (double the normal contribution of 18K)  for up to 3 years, but not including the year in which you retire.  This amount can even be higher if the normal contribution increases....

So right now, I'm contributing $36K to my 457.  My wife is contributing $24K to her 403b and $24K to her 457 for a grand total of $84K


dandarc

  • Magnum Stache
  • ******
  • Posts: 2993
  • Age: 35
Re: Found "Loop Hole" in 457 Plan
« Reply #1 on: September 29, 2017, 08:25:50 AM »
Keep in mind - you have to have been eligible but not participating in prior years to take advantage of that.  This lets you put in some of the contributions you "missed" in prior years.  Also - this is only available within 3 years of the plan's normal retirement age.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-457b-contribution-limits

Peter Parker

  • Stubble
  • **
  • Posts: 162
Re: Found "Loop Hole" in 457 Plan
« Reply #2 on: September 29, 2017, 08:27:52 AM »
Keep in mind - you have to have been eligible but not participating in prior years to take advantage of that.  This lets you put in some of the contributions you "missed" in prior years.  Also - this is only available within 3 years of the plan's normal retirement age.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-457b-contribution-limits

Exactly.  Work closely with payroll/HR and your plan's administrator to make sure you are good to go....

Ed Mills

  • Stubble
  • **
  • Posts: 113
  • Location: Merida, Mexico, Chattanooga, TN & Swampwater, GA
  • Join the FI Revolution Y'all!
    • The Millionaire Educator
Re: Found "Loop Hole" in 457 Plan
« Reply #3 on: September 29, 2017, 09:57:19 AM »
Thanks for the info; I'm going to explore this.  I love my 457 plan!  Ed
Became a SWAMI at age 45 and took first break from teaching at age 48.  Not bad for a guy with no car and a net worth of -$45k at age 33.  Now selfishly-employed educator who blogs at:  The Millionaire Educator / $500k in 4.5 Years / My Trillionaire Plan / 2017 Free Money!

Peter Parker

  • Stubble
  • **
  • Posts: 162
Re: Found "Loop Hole" in 457 Plan
« Reply #4 on: September 29, 2017, 10:13:49 AM »
Thanks for the info; I'm going to explore this.  I love my 457 plan!  Ed

Here's some info that might be helpful (but you should check your specific plan).  I found my HR/Payroll people didn't know anything about it (because no one has taken advantage of it) so I had to work specifically with the plan administrator to coordinate and make it happen with payroll....

http://www.stancounty.com/riskmgmt/docs/eb-forms/mass-mutual-catchup-brochure.pdf
« Last Edit: September 29, 2017, 10:18:29 AM by Peter Parker »

facepalm

  • Stubble
  • **
  • Posts: 143
  • Location: California
Re: Found "Loop Hole" in 457 Plan
« Reply #5 on: September 29, 2017, 07:13:13 PM »


So right now, I'm contributing $36K to my 457.  My wife is contributing $24K to her 403b and $24K to her 457 for a grand total of $84K
That's awesome. I plan on taking this deduction in one or two years, when I am four years out. I've already confirmed with my plan administrator that I can.

But honestly, I'd be happier if I had been contributing the max to my 457 all these years . . . .

403(b)s also have a catch up provision. It's not as big.
« Last Edit: September 29, 2017, 07:15:02 PM by facepalm »

Peter Parker

  • Stubble
  • **
  • Posts: 162
Re: Found "Loop Hole" in 457 Plan
« Reply #6 on: September 29, 2017, 09:01:53 PM »


Yeah--I would rather have contributed the max all the way through.... If "if and buts were candy and nuts, we'd all have a merry christmas..."  If I think too much of my mistakes, I cringe. Ugh.  But I'm glad to get this opportunity.
« Last Edit: September 29, 2017, 09:03:31 PM by Peter Parker »