Author Topic: End of 457b contributions. What next?  (Read 682 times)

px4shooter

  • Stubble
  • **
  • Posts: 140
End of 457b contributions. What next?
« on: April 20, 2020, 01:20:21 PM »
I am finishing out my career at my .gov employer. I will end my final 3 year catch-up provision in the 457b, with the 39k taken out this year. Even after this contribution, I should have a final check of 50k or so.

I will then transition to another employer or self employed. Does my 457b contributions matter when I look at a SEP-IRA, Simple, or other 401k options?

Are there any income limits I need to be concerned about?

I don't need any of the 50k, so I want to max out my options for retirement savings.

Any ideas? My CPA was unsure about it, since I am his only 457b client. He isn't really in tune with the savings side of financial planning.

terran

  • Magnum Stache
  • ******
  • Posts: 3796
Re: End of 457b contributions. What next?
« Reply #1 on: April 20, 2020, 01:40:29 PM »
No, the 457(b) doesn't effect any other limits. Unlike a 403(b)/401(k) you can even make elective contributions ($19.5k limit) to either of those plan types despite already maxing out a 457(b). It does effect IRA contribution income limits as this counts as being covered by a workplace retirement plan.

If you don't plan to have any employees in your self-employed venture then a solo 401(k) will have the highest limit at the lowest income. Note that your contributions will be limited by self employment income, not total income.

The only place you can put the $50k from your current job is an IRA. All self employed or new workplace retirement plans will have to be contributed to based on the income you earn from the sponsoring employer.

px4shooter

  • Stubble
  • **
  • Posts: 140
Re: End of 457b contributions. What next?
« Reply #2 on: April 21, 2020, 11:45:10 AM »
Thanks.

I was hoping to use the 50k for something, but it is post-tax funds. We don't have an employer based 401k and my total income (from employer and 2 businesses) exceeded the IRA contribution limits.

Would a self-directed 401k be my best option?

If not, what would you recommend?

terran

  • Magnum Stache
  • ******
  • Posts: 3796
Re: End of 457b contributions. What next?
« Reply #3 on: April 21, 2020, 11:52:39 AM »
If you have self employment income and no employees other than you or a spouse then a solo 401(k) would be a good option. Contribution limits depend on business income.

Do you have any previously deducted IRA balances? If not, you could make backdoor Roth IRA contributions. Opening a solo 401(k) at the right place (if eligible) would also allow this since you could roll the IRAs into it to get rid of them.

Other than that, investing in a taxable brokerage account is your only option.


 

Wow, a phone plan for fifteen bucks!