457 account - withdraw or roll over?

[MaxPower]

I've got about $3k in a 457 account from my internship. The money was invested pre-tax, with a 50% match from my employer. As I'll be moving to a different institution, it appears that I have the option of withdrawing that money now (well, once the year is over), and pay taxes on it, or rolling it over into an IRA or my next 401k and leave it tax free.

Any advise on what to do here?

I'm not in desperate need for this money, but then I do have to move and could definitely use it. Rolling it over would keep it without taxes, but then I plan (hope?) to be in a higher tax bracket even when I am retired. I suppose the other option would be to withdraw this money and deposit it into my Roth IRA, although I think it would max or nearly max out my contributions for this year. I did not fully max out my Roth last year, though, so maybe it will at least force me to save a bit more.

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[edmadison]

In my opinion, you should always opt for control. If you can move the money into a no fee IRA, DO IT.

Ed

 

[The Sonoran]

Hey, that's a pretty good match.

It doesn't sound like you are in "desperate" need of the money, so I wouldn't suggest withdrawing it and paying taxes on it, just to spend it.

I agree with Ed in saying control is important, so an IRA is a better choice.

However, you're probably are in a low tax bracket right now, so the taxes on it would be minimal after withdrawal. Since it's a 457, they'll be no early withdrawal penalty. If you have a long time frame before retirement, it may be a better choice to withdraw it and max out your Roth IRA, since earnings over the years can be withdrawn tax-free upon reaching eligibility.

Good luck!

 

[MaxPower]

Thanks for the comments. I'll probably leave it in the 457 for a few months and re-evaluate my need for the money this year. I'm moving to a significantly more costly city and paying significantly more rent with a modest increase in salary. At that time if I need it, I'll go ahead and use it. If I haven't been able to save significantly but don't need the money urgently, I'll go ahead and withdraw it to place into my Roth IRA, since as you said the taxes on it now should be a lower percentage than in the future. If I've been somehow able to save enough to max out my Roth, I'll roll it over to my traditional IRA. I guess my final option would be to just leave it there as an "emergency" fund, but the options for investing are terrible.