457b, leaving training and separating from employer

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Ravenclaw90

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Has anyone recently dealt with this situation? I am finishing training and will be "separating from my employer", an academic hospital, this July. I have been contributing to the deferred compensation Roth 457b. I want to either 1) roll it into my Roth IRA at Vanguard, 2) roll it into my new employer's 401k, or 3) withdraw the funds.

Besides the fees and available investment options between the Roth IRA vs new employer's 401k, is it important to consider anything else when choosing between which to roll it into? How will rolling it into an IRA affect my ability to do a backdoor Roth IRA? I have read that it may become "pro-rated", but I'm not sure what that means.

If I were to withdraw all the funds, do I end up having to pay tax on the gains? My understanding is that I have already paid taxes on the deferred compensation; therefore it is my money and can be withdrawn before age 59 1/2...UNLESS I choose to roll it into a Roth IRA or 401k, which would then mean I cannot withdraw it before age 59 1/2 without paying 10% penalty.

Please feel free to chime with any advice or corrections if I've misunderstood something about this situation. Thanks!

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You can't roll 457 funds into IRAs or 401(k) accounts.

You may be able to leave it there, or take disbursements over a period of time. Ask the manager.

If you only funded it as a resident, there probably isn't a lot there, so your best option might just be to take the full disbursement as taxable income this year, since this year will be your last low-income year.
 
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Has anyone recently dealt with this situation? I am finishing training and will be "separating from my employer", an academic hospital, this July. I have been contributing to the deferred compensation Roth 457b. I want to either 1) roll it into my Roth IRA at Vanguard, 2) roll it into my new employer's 401k, or 3) withdraw the funds.

Besides the fees and available investment options between the Roth IRA vs new employer's 401k, is it important to consider anything else when choosing between which to roll it into? How will rolling it into an IRA affect my ability to do a backdoor Roth IRA? I have read that it may become "pro-rated", but I'm not sure what that means.

If I were to withdraw all the funds, do I end up having to pay tax on the gains? My understanding is that I have already paid taxes on the deferred compensation; therefore it is my money and can be withdrawn before age 59 1/2...UNLESS I choose to roll it into a Roth IRA or 401k, which would then mean I cannot withdraw it before age 59 1/2 without paying 10% penalty.

Please feel free to chime with any advice or corrections if I've misunderstood something about this situation. Thanks!

I'm in the same boat and to me nothing makes more sense than just rolling it into your Roth IRA at vanguard. You have more control over it, and likely less fees. I'll be rolling my Roth 403b and Roth 457b both into my Roth IRA in a couple months, as well as doing a Roth conversion + rollover moving all my pre-tax 403b money my employer contributed and putting it in my Roth IRA.

It will NOT affect your backdoor Roth IRA, as it's Roth money going into a Roth IRA. A tradition or SEP IRA would, however, cause a pro-rata issue.

Because you said your contributions were all post-tax (Roth) this tells me it's a "qualifying" 457b aka governmental 457b, so rolling this is allowed, unlike a non-governmental one which requires distribution upon separation.

Yes, you could withdraw it all tax and penalty free, since your contributions were post-tax. If you roll it into your Roth IRA, you have to leave it alone for 5 years. After 5 years you could remove the money you contributed without penalty, but not the gains that accumulated since it was in the Roth IRA. But IMO you should not withdraw any of it, as it defeats the purpose of retirement savings!

Roll it into the Roth IRA and let it grow!
 
You can't roll 457 funds into IRAs or 401(k) accounts.

You may be able to leave it there, or take disbursements over a period of time. Ask the manager.

If you only funded it as a resident, there probably isn't a lot there, so your best option might just be to take the full disbursement as taxable income this year, since this year will be your last low-income year.
Qualifying aka governmental 457b's are able to be rolled to a 401k or IRA, or to another governmental 457b. They also allow Roth contributions, unlike non-governmental 457b's.

 
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Qualifying aka governmental 457b's are able to be rolled to a 401k or IRA, or to another governmental 457b. They also allow Roth contributions, unlike non-governmental 457b's.

Sorry, should've specified non-gov 457s like the OP's.

I had a non-gov 457 with a small amount of money in it, and in the end the best option for me was to cash it out when I left. Didn't have any rollover options.
 
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