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Author: RGOLDPET Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19483  
Subject: 457 deferred Govt compensation Date: 1/13/2002 12:54 PM
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A new change (EGTRRA)effective 1/1/2002 appears to allow directing a stream of payments from a 457 plan to an IRA. If anyone, especially Pixy, knows if/how I can do this I would like to start this month. Thanks, Ralph
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7685 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/13/2002 1:41 PM
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Greetings, Ralph, and welcome. You asked:

A new change (EGTRRA)effective 1/1/2002 appears to allow directing a stream of payments from a 457 plan to an IRA. If anyone, especially Pixy, knows if/how I can do this I would like to start this month.

Such payments are eligible for transfer to an IRA only when they result in the total distribution of plan assets in less than ten years. Otherwise, these payments would not be eligible for transfer just as those from a qualified plan that last ten or more years are ineligible. If the payments do last less than ten years, then they may be transferred, but you may not want to do that, particularly if you are younger than age 59 1/2 and want the money before then. Once transferred to an IRA, the money becomes subject to all IRA rules for withdrawal.

Regards..Pixy

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Author: RGOLDPET Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7686 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/13/2002 6:02 PM
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Thank you Pixy.I dont know how you know all this stuff but you are right on. My question now is, can I send the payments directly within 60 days to an established Vanguard traditional IRA myself or do I have to establish a plan with the payer to send the money to Vanguard? Can I mix the methods? Since the next check I get will be next week, the fastest meathod would save additional taxes for us at this time. Today is Sunday so I will call Vanguard Monday and the plan administrator. It maybe hard to get through so I greatly appreciate your info above. Thanks, Ralph

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Author: mldorsey1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7687 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/14/2002 1:13 AM
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If you want you can stop and start distributions from your 457. My plan now allows a change twice a year where before I was locked in to the amount I chose on the day I retired 3 years ago. Now I can manage my distributions much better and still use the excelent mutual funds in the plan and not worry about IRA early withdrawal penalties, etc.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7688 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/14/2002 7:35 AM
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Ralph asks:

My question now is, can I send the payments directly within 60 days to an established Vanguard traditional IRA myself or do I have to establish a plan with the payer to send the money to Vanguard? Can I mix the methods?

Yes, you could send those payments to your IRA within 60 days of receipt yourself should you so desire. Just remember that 20% was withheld for potential income taxes by the plan, and that 20% must be claimed as income by you at tax time. If you wish to avoid that, then you must take funds from other resources and add the missing 20% to the rollover. The withholdings would be refunded to you at tax time depending on your overall income tax situation at that time. I mention that only because it's easy to forget what happens when you receive direct payments yourself.

IMHO a simpler approach may be to arrange for a direct transfer of the plan money to an IRA or IRAs of your choice. That way nothing gets withheld and you will not have to declare any part of the distribution as income for the year.

And yes, you can mix the two procedures (direct transfer and rollover) if the plan allows you to do so. That's up to the plan.

Regards..Pixy

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7689 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/14/2002 7:38 AM
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Mldorsey1 writes:

If you want you can stop and start distributions from your 457. My plan now allows a change twice a year where before I was locked in to the amount I chose on the day I retired 3 years ago. Now I can manage my distributions much better and still use the excelent mutual funds in the plan and not worry about IRA early withdrawal penalties, etc.

You're fortunate that your plan allows that. Most do not. Starting, stopping or changing distributions is strictly up to the plan, so a blanket statement that every 457 participant may do so is incorrect. Participants must check with their own plan administrators to see what is and is not allowed regarding distributions.

Regards...Pixy

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Author: RGOLDPET Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7690 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/14/2002 10:03 AM
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Thank you both for your replies. I am as always amazed at the amount of knowledge imparted on this board. A couple of phone calls this morning confirms that the stream of payments can go to the IRA if I write them each a letter with my directions. Easier than I had feared. Thanks all, Ralph.

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Author: mldorsey1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7691 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/14/2002 1:42 PM
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These changes to my 457 were effective 1-1-02. Anyone with a 457 should check their own plan now to see what improvements are available.

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Author: boxout Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7695 of 19483
Subject: Re: 457 deferred Govt compensation Date: 1/15/2002 6:03 PM
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I also have 457 plan, and I have just retired. My current plan is to move the whole thing to an IRA within the next couple of months (no more requirement to make a distribution decision within 60 days, right?). I will be 59 and 1/2 by the end of this year and shouldn't need any of this money this year due to extra, one time income. Next year I plan to start IRA distributions. Over a period of time I plan to transfer the IRA funds into a Roth, paying applicable taxes as I go in small chunks from the annual distributions.

I would be interested in comments on this scheme. It seems reasonable to me, but would not want to get to cute and paint myself into some kind of corner.

P.S. I'm planning on using Vanguard for the IRA. Is there any risk involved with having all my eggs with one fund vendor (e.g if the fund vendor has financial problems)?

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