The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: purplish on January 06, 2014, 04:54:03 PM

Title: What should I do with my 457 account from past employer?
Post by: purplish on January 06, 2014, 04:54:03 PM
Hello!  I have a 457 fixed rate ING account from a job years ago.  Should I leave the money in it, or roll it over to something else?  Can it only be rolled into a retirement account or can I put it into a regular index funds account?
Title: Re: What should I do with my 457 account from past employer?
Post by: Another Reader on January 06, 2014, 05:09:23 PM
If the investment choices are good and the amount of money is significant, I would consider leaving it in the 457 plan.  Because it is deferred compensation, not a qualified retirement plan, there is no penalty for taking distributions prior to age 59 1/2.  457's can therefore be helpful to the early retiree.

One caveat is that non-governmental 457 accounts are not held in trust for you, but remain the property of your former employer.  Should the entity go bankrupt, your account would be treated as an asset and you could lose it in the bankruptcy.
Title: Re: What should I do with my 457 account from past employer?
Post by: arebelspy on January 06, 2014, 07:53:23 PM
If the investment choices are good and the amount of money is significant, I would consider leaving it in the 457 plan.  Because it is deferred compensation, not a qualified retirement plan, there is no penalty for taking distributions prior to age 59 1/2.  457's can therefore be helpful to the early retiree.

One caveat is that non-governmental 457 accounts are not held in trust for you, but remain the property of your former employer.  Should the entity go bankrupt, your account would be treated as an asset and you could lose it in the bankruptcy.

Big +1 to both these paragraphs.

Also you can roll it into another 457 if your current employer offers them.
Title: Re: What should I do with my 457 account from past employer?
Post by: purplish on January 07, 2014, 05:42:42 PM
Thanks!  My work wasn't a government agency, it was a private school.  However most of the money put into it was my own, they only matched a little of it.  Does that mean my own money is not mine?
Title: Re: What should I do with my 457 account from past employer?
Post by: Another Reader on January 07, 2014, 05:45:44 PM
It was pay that you deferred.  It still belongs to your employer.  In this case, I would lean more towards rolling the money over into an IRA, especially if it is not a huge sum.
Title: Re: What should I do with my 457 account from past employer?
Post by: purplish on January 07, 2014, 09:25:56 PM
It was pay that you deferred.  It still belongs to your employer.  In this case, I would lean more towards rolling the money over into an IRA, especially if it is not a huge sum.
What would be the difference if I rolled it into an IRA?  I don't know much about this kind of thing, sorry.
Title: Re: What should I do with my 457 account from past employer?
Post by: Another Reader on January 07, 2014, 09:34:58 PM
If you roll the account into an IRA, you have moved the money into a qualified retirement plan that you own and control.  The money is no longer deferred compensation and is your asset, not your former employer's asset.  You do lose the ability to access it before age 59 1/2 without penalty - it's the same as a traditional IRA. 
Title: Re: What should I do with my 457 account from past employer?
Post by: arebelspy on January 07, 2014, 10:51:55 PM
If you're close to FIRE, it's probably worth keeping and accessing right away as the first funds you tap in ER.
Title: Re: What should I do with my 457 account from past employer?
Post by: purplish on January 20, 2014, 01:00:53 PM
Another question- If I began investing in a Vanguard Index account, could I roll this over into that?  Or does it have to be rolled into some other retirement account like 401k or Roth IRA?
Title: Re: What should I do with my 457 account from past employer?
Post by: Another Reader on January 20, 2014, 01:06:44 PM
If you move the money into a taxable account, that is a distribution.  You will pay taxes on the money, but no penalty.  To avoid paying taxes now, you can roll it into a traditional IRA.  Or, you can pay taxes now but not on the earnings later by rolling the money into a Roth IRA.