Hello All - I feel like this is a simple thing but there is something I'm just not getting. I have a 457 Deferred Compensation plan at work. I have been contributing pre-tax money for years but they have recently made the account eligible for Roth contributions as well. I believe the difference is that the earnings from the Roth contributions will not be subject to tax, (just like a Roth IRA), whereas earnings from the pre-tax contributions would be subject to tax later. I switched to making Roth contributions several months ago.What I'm not wrapping my head around is that the 457 account has both pre-tax and Roth money in the same account. I do not understand how contribution before tax and after tax can be co-mingled when earnings from those amounts are treated differently later. If that question makes sense to someone, what am I missing here??TIA!
Sounds like my State of Oregon 457b deferred comp plan.First you should just phone your plan administrators and ask them. I have always found plan admins to be pretty smart.I was offered the chance of saving my last paycheck into a Roth. It ended up in a Charles Schwab self-directed Roth.I also had a fund in my 457b called a Charles Schwab PCRA fund and I could contribute/transfer up to 90% of my 457b into.Both my 457b and my Charles Schwab have great people to talk to when I phone.I hope this helps.
What I'm not wrapping my head around is that the 457 account has both pre-tax and Roth money in the same account. I do not understand how contribution before tax and after tax can be co-mingled when earnings from those amounts are treated differently later.Roth accounts in employer plans are called 'sub-accounts' by the IRS for a reason - they are accounted for separately from any pre-tax money. As MoneySlob suggested, if you can't figure out how to see the separate accounts on the website, or on the account statements, then you should call the administrator and have them explain to you how to differentiate between the pre-tax sub-account and the Roth sub-account.AJ
Thanks for the responses. I believe I understand the accounting magic now. I was hoping to invest the Roth contributions differently but I guess that is not possible with this type of an account.
Well, is it self directed?Can you choose what stocks to buy?Ask them that because they are investing in something. It is not a savings account.My Roth is self directed.And Roth is good stuff seeing as how our govy is kicking up the national debt with covid rescue packages. I am getting off topic here.
I was hoping to invest the Roth contributions differently but I guess that is not possible with this type of an account.If you are now making only Roth contributions, can you change the way that the contributions are invested without changing the way that the current investments are invested? That was an option in all of my employer plans, but I never had a 457. If you can do that, then you can invest the Roth money differently.AJ
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