The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Can I use 457b (deferred comp) for Roth IRA? Date:  11/29/2020  10:03 PM
Author:  aj485 Number:  131408 of 132106

I have money in a 457b plan that I contributed pre-tax money every month.
I am no longer working, retired May 2019. Can I add the limit for 2020 to my Roth IRA by taking out money from the 457b and paying taxes on it?

If you are asking if you can make a contribution to your Roth IRA - no you cannot, since the income from your 457 is considered to be pension income, not compensation. In order to make regular contributions to either a Traditional or a Roth IRA, you must have compensation income. You can see what's considered compensation in IRS Pub 590a

However, you can convert as much money as you want from your 457 into your Roth IRA - the only limit is how much you want to pay in taxes. Be aware, if you actually take the money out of the 457 and put it into your checking/MM/etc. account and then send the money to your IRA, that's considered a non-trustee-to-trustee rollover, and you are limited to one of those every 365 days. So it's best to do a trustee-to-trustee rollover, as you can do as many of those as you want.

Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us