Author Topic: 401 & 457  (Read 4358 times)

Scommm

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401 & 457
« on: June 12, 2017, 04:01:51 PM »
Left old employer, thinking about rolling over to IRA, or possibly to new employer 401.  I have been reading up on pro / con of 401 vs IRA etc and thought I would see what the MMM community things.

Currently 46 y/o, want to pull the plug by 55, and understand possibly under a rule 72t I may be able to get access to funds in those accounts without penalty if I leave them there or at least if they're in another employer sponsored plan possibly, but not if they get rolled to an IRA.

Any thoughts / advice?

jfer_rose

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Re: 401 & 457
« Reply #1 on: June 12, 2017, 04:09:13 PM »
Can you clarify what type of account the money is in now?

robartsd

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Re: 401 & 457
« Reply #2 on: June 12, 2017, 04:29:32 PM »
Rule 72(t) applies just as much to a IRA as a 401(k). I can't think of any advantage to rolling a 401(k) from one employer to annother instead of rolling into a Vanguard IRA. On the other hand, 457 plans usually can provide penalty free withdrawls after you leave the employer the plan is with. If you can transfer 457 funds to a new employer's 457, it could be convienent to close out an old account/save account maintenance costs while keeping the funds in a 457 plan.

thenextguy

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Re: 401 & 457
« Reply #3 on: June 12, 2017, 05:20:54 PM »
I can't think of any advantage to rolling a 401(k) from one employer to annother instead of rolling into a Vanguard IRA.

Agree. The only possible advantage I can think of is that some plans will let you borrow against a 401(k) balance. So in that very specific case, transferring might make sense if you plan to borrow against the balance. Otherwise, it's better to keep in an IRA.

threefive

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Re: 401 & 457
« Reply #4 on: June 12, 2017, 05:46:31 PM »
If you are looking to pull the plug at 55, then rolling the 401k money into your new employer's 401k will allow you to begin penalty-free withdraws if you leave employment in the year you turn 55. If you roll into an IRA, then it's 59.5. Whether this is advantageous depends on a lot of things, the most important being cost and options in the 401k.

Scommm

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Re: 401 & 457
« Reply #5 on: June 12, 2017, 10:00:25 PM »
Rule 72(t) applies just as much to a IRA as a 401(k). I can't think of any advantage to rolling a 401(k) from one employer to annother instead of rolling into a Vanguard IRA. On the other hand, 457 plans usually can provide penalty free withdrawls after you leave the employer the plan is with. If you can transfer 457 funds to a new employer's 457, it could be convienent to close out an old account/save account maintenance costs while keeping the funds in a 457 plan.

OK, so the only advantage over keeping the 401 & 457 would be creditor protections vs an IRA then from what I am seeing.

Scommm

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Re: 401 & 457
« Reply #6 on: June 12, 2017, 10:02:04 PM »
Can you clarify what type of account the money is in now?

401 & 457

PhysicianOnFIRE

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Re: 401 & 457
« Reply #7 on: June 13, 2017, 08:59:33 PM »
If you earn to much to contribute directly to a Roth IRA, having all the money in 401(k) and 457(b) (and none in a traditional IRA) allows you to do backdoor Roth conversions.

That's why I rolled my IRA into my employer's 401(k).

Lobo

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Re: 401 & 457
« Reply #8 on: June 17, 2017, 10:20:39 PM »
Money in a 457b can be withdrawn penalty free once employment is severed - no need for a backdoor anything.

TomTX

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Re: 401 & 457
« Reply #9 on: June 18, 2017, 02:02:07 PM »
Can you clarify what type of account the money is in now?

401 & 457

Unless it's a trivial amount of money and/or fees are outrageous, 457 money should stay in a 457. As noted, the major advantage is that you can "retire" at any age and withdraw as needed. All you have to do is not work for that employer any longer.

Scommm

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Re: 401 & 457
« Reply #10 on: June 19, 2017, 11:35:54 AM »
Money in a 457b can be withdrawn penalty free once employment is severed - no need for a backdoor anything.

So, from what I recall there's a minimum age to start withdrawals from the 457 right?

Also, second question; if I get a new job with a new 401 does that affect my ability to take funds from the 457 at a future date or is the idea simply that I am no longer with that previous 457 employer?

runewell

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Re: 401 & 457
« Reply #11 on: June 19, 2017, 11:38:03 AM »
If you are looking to pull the plug at 55, then rolling the 401k money into your new employer's 401k will allow you to begin penalty-free withdraws if you leave employment in the year you turn 55. If you roll into an IRA, then it's 59.5. Whether this is advantageous depends on a lot of things, the most important being cost and options in the 401k.

You can access money from an IRA penalty-free before 59.5 so if you are serious about retiring early this should not be a major consideration.

I would put it in my own IRA (if I wanted to manage it myself) so I could invest it in anything, not just the employer's options.

Lobo

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Re: 401 & 457
« Reply #12 on: June 19, 2017, 02:41:02 PM »
Money in a 457b can be withdrawn penalty free once employment is severed - no need for a backdoor anything.

So, from what I recall there's a minimum age to start withdrawals from the 457 right?

Also, second question; if I get a new job with a new 401 does that affect my ability to take funds from the 457 at a future date or is the idea simply that I am no longer with that previous 457 employer?
There is no minimum age for 457b withdrawals.  The money can be accessed penalty free once you are no longer working for the employer which provided the plan.  This only applies to 457b not 401k - they are two different plans.

TomTX

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Re: 401 & 457
« Reply #13 on: June 19, 2017, 06:24:27 PM »
Money in a 457b can be withdrawn penalty free once employment is severed - no need for a backdoor anything.

So, from what I recall there's a minimum age to start withdrawals from the 457 right?

You remember wrongly. You could be 18 years old. It would probably be stupid, but you could do it without penalty if you no longer work for THAT employer.  Age does not matter for 457.

Quote
Also, second question; if I get a new job with a new 401 does that affect my ability to take funds from the 457 at a future date or is the idea simply that I am no longer with that previous 457 employer?

New employer doesn't matter. Participating in a 401k doesn't matter. What matters is whether you are still working for the employer where you contributed to the 457. 

Now, if you do a rollover of the 457 money into an IRA, yeah - all the age related stuff applies.  Because you won't be withdrawing from a 457, you will be withdrawing from an IRA.