Hi all- Looking for some advise on my 457b decision. I am struggling with this decision because of the post employment distribution rules and possible tax consequences. (rules of the 457 are copied below)
My situation:
I am 35 and will probably not be with this employer for my entire career, probably 5-7 more years. I will probably leave for a similar or higher paying job in another city. At that point I will have to make a decision on distribution options and fear the tax consequences of the distribution. I believe I can choose the timing of the distribution but have to decide within 90 days of separation and can not be changed! I am already maxing out my 403b and close to paying off student loan debt. My goal is FI by 50 and hopefully retirement by 55. I fear that if i start maxing out the 457b I will feel the need to stay with the employer and will start losing my flexibility to move on.
What would you do in this situation after the loans are paid off? Max the 457b as well and just estimate when a good date for distributions will be? if so which of the distribution options below would you choose? or invest in after tax or somewhere else?
457(b): Under the 457(b) Deferred Compensation Plan, you have 90 days after your
employment is severed to make a one time, irrevocable decision on the distribution
option and timing. In the event an election is not made during the 90-day period
following severance from employment, the participant shall be paid in 5 equal annual
installment payments. The payments will begin as soon as administratively possible after
the 90-day period.
Distribution Options:*
• Lump sum, or
• Installment payments (monthly, quarterly, semi-annual, or annual), or
• Single Life Annuity, or
• Joint Life Annuity
* Federal law does not allow 457(b) money to be rolled to an IRA.
Thanks for any input.