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?
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 https://www.irs.gov/pub/irs-pdf/p590a.pdfHowever, 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.AJ
Just to add to AJ's response because you had asked about Medicare income limits in the previous thread, be aware that any money you convert from your 457 plan to a Roth IRA is considered taxable income, and so you want to watch that you don't go over the Medicare income threshold due to your conversions.I am in the process of converting from a Traditional IRA to a Roth, and am planning on going close to the maximum Medicare income threshold so have been paying attention to this. Remember, too, that the MAGI for Medicare is your AGI from your 1040 plus any tax exempt interest that would not be included in your AGI on your 1040.I have a spreadsheet that I'm using to calculate what we can convert, so if you plan to be close to the threshold, you may want to build something like that to help you.Just one more thing for you to be considering.
Just one more thing for you to be considering. Thanks. I am still trying to figure out what AJ said.First paragraph she said I can't.Next paragraph she said I can. Trying to figure that out.And then you say you are in the process of converting from a traditional IRA to a Roth. Scratching head now.My plan b doubled for 2021. Only fair because I was still working first 5 months, I received $20k in SSI payoff.For 2020 I have about $6k before I hit $138k which I want to put in my Roth if possible.TIA
First paragraph she said I can't.Next paragraph she said I can. Trying to figure that out.Contributing vs. converting - 2 different things with different rules.
You need to get a handle on the difference between a contribution and a conversion. AJ said that it appears you can’t make a contribution to your Roth. But anyone can do a conversion. These are two different things. —Peter
I have a 457 from a healthcare organization. I also had a 403b. I was able to move the 403b over to a Traditional IRA and I'm in the process of converting (over time) those funds to a Roth IRA. It is my understanding that some 457 cannot be converted this way to a Roth IRA. I believe government related 457s can be converted. They are called 457b. I believe my 457 is a 457f. I've been told by my company that my 457 cannot be moved to a Traditional IRA. I believe the reasoning may be that I was also provided a 403b plan and it has the same maximum contributions (and tax advantages) that a 401K has. So I believe if your organization offers only a 457 plan and no 401K or 403B plan then I think you are probably under a 457 that can move the funds over to a Traditional IRA and then to a Roth. If you have both a 457 and either a 401K or 403B from your company then I think the rules are still that you can't move these funds into either a Traditional or Roth IRA.
Thanks. I am still trying to figure out what AJ said.First paragraph she said I can't.Next paragraph she said I can. Trying to figure that out.You seem to be confused about contributions vs. conversions.A contribution is money from your compensation that is added to an IRA - in 2020, the limit is $6k ($7k if 50 or older). Depending on the type of IRA, you may need to meet income requirements to deduct the contribution to even be able to make the contribution.Conversions are taking money from a Traditional (pre-tax) qualified account and moving it to a Roth account. The Traditional account can be a 401(k), a 403(b), a 457, a Traditional IRA, etc. The Roth account can be an IRA, a 401(k), a 403(b), or any other type of plan that offers a Roth account.AJ
Thank you everyone. Funny how I missed the mention of conversion versus contribution.
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