Pension payout rollover - where to?

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BorqaZ
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Joined: Sat Mar 16, 2024 7:01 pm

Pension payout rollover - where to?

Post by BorqaZ »

I am changing job before a 5 year vesting period so I need to cash out or rollover my pension. Clearly cashing out is a bad idea and will roll it over.

I have the option to rollover my contributions to

A/ 457 plan (govt plan)
B/ 401k plan
C/ IRA

I like the idea of rolling it over to IRA but I might have read somewhere that I CANNOT do backdoor Roth if I have IRA balance.

My new employer doesn't not offer 401k. It offers 403b and 457.

I also have a 457 account with my current (soon to be old) employer and the 457 is managed elsewhere, i.e. is separate from my employer, so I believe I can rollover my pension to either new or current 457 accounts.

Any recommendations about these choices and the process?

Thank you!
PoppyA
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Re: Pension payout rollover - where to?

Post by PoppyA »

A Quick Look at the Wiki provides this (sections 5,6 &7)

https://www.bogleheads.org/wiki/Priorit ... nvestments
Topic Author
BorqaZ
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Re: Pension payout rollover - where to?

Post by BorqaZ »

PoppyA wrote: Mon Apr 01, 2024 11:28 am A Quick Look at the Wiki provides this (sections 5,6 &7)

https://www.bogleheads.org/wiki/Priorit ... nvestments
Thank you for the response! My question is not about funding/saving priority. Or is it??

Essentially, I need to rollover my pension payout to one of the two options -- IRA or 457. If I go with the IRA, then I may not be able to contribute backdoor Roth. If I go with 457, I have two options -- with my current (soon to be old government plan) or my new (nongovernmental plan).

So I am trying to determine the best way forward among these choices.

Thanks!
Topic Author
BorqaZ
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Re: Pension payout rollover - where to?

Post by BorqaZ »

One more info.

I have 401k with an a previous employer. Can I roller the pension payout to that account? Does it have to be current 401k?

I contacted the relevant office but they are not helping (couldn't get a hold of anyone), ome of the reasons I am leaving. Inefficiency.
Topic Author
BorqaZ
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Re: Pension payout rollover - where to?

Post by BorqaZ »

Anyone? Thanks!
Geologist
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Re: Pension payout rollover - where to?

Post by Geologist »

Most employers won't allow former employees to rollover funds into a 401k. However, this is plan dependent so you would have to contact the former employer.

Do you know your current employer won't allow a rollover into the 403b?
Geologist
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Re: Pension payout rollover - where to?

Post by Geologist »

In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
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Sandi_k
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Re: Pension payout rollover - where to?

Post by Sandi_k »

Geologist wrote: Mon Apr 01, 2024 7:20 pm In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
Geologist
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Re: Pension payout rollover - where to?

Post by Geologist »

Sandi_k wrote: Tue Apr 02, 2024 11:44 am
Geologist wrote: Mon Apr 01, 2024 7:20 pm In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
The OP, however, might want to be careful about choosing the 457 of their new employer, because the rules governing nongovernmental 457 plans are much less favorable than for governmental 457 plans (see the wiki for some of the complexities: https://www.bogleheads.org/wiki/457(b)).
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Sandi_k
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Re: Pension payout rollover - where to?

Post by Sandi_k »

Geologist wrote: Tue Apr 02, 2024 5:31 pm
Sandi_k wrote: Tue Apr 02, 2024 11:44 am
Geologist wrote: Mon Apr 01, 2024 7:20 pm In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
The OP, however, might want to be careful about choosing the 457 of their new employer, because the rules governing nongovernmental 457 plans are much less favorable than for governmental 457 plans (see the wiki for some of the complexities: https://www.bogleheads.org/wiki/457(b)).
True. But they can roll to the 457 until age 59.5, and then move from the 457 to the IRA once drawing it down and no longer employed.
Geologist
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Re: Pension payout rollover - where to?

Post by Geologist »

Sandi_k wrote: Tue Apr 02, 2024 10:11 pm
Geologist wrote: Tue Apr 02, 2024 5:31 pm
Sandi_k wrote: Tue Apr 02, 2024 11:44 am
Geologist wrote: Mon Apr 01, 2024 7:20 pm In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
The OP, however, might want to be careful about choosing the 457 of their new employer, because the rules governing nongovernmental 457 plans are much less favorable than for governmental 457 plans (see the wiki for some of the complexities: https://www.bogleheads.org/wiki/457(b)).
True. But they can roll to the 457 until age 59.5, and then move from the 457 to the IRA once drawing it down and no longer employed.
Not according to this chart from the IRS: https://www.irs.gov/retirement-plans/co ... 457b-plans
(i.e., non-governmental 457b's cannot be rolled over to IRA's).
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Sandi_k
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Re: Pension payout rollover - where to?

Post by Sandi_k »

Geologist wrote: Wed Apr 03, 2024 9:46 am
Sandi_k wrote: Tue Apr 02, 2024 10:11 pm
Geologist wrote: Tue Apr 02, 2024 5:31 pm
Sandi_k wrote: Tue Apr 02, 2024 11:44 am
Geologist wrote: Mon Apr 01, 2024 7:20 pm In addition, if you rollover your 401k to an IRA, then you won't be able to do Roth conversions without dealing with pro-rata calculations. As the second step of a backdoor Roth contribution is a Roth conversion, then your supposition that it would be out if you rollover to an IRA is correct.
I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
The OP, however, might want to be careful about choosing the 457 of their new employer, because the rules governing nongovernmental 457 plans are much less favorable than for governmental 457 plans (see the wiki for some of the complexities: https://www.bogleheads.org/wiki/457(b)).
True. But they can roll to the 457 until age 59.5, and then move from the 457 to the IRA once drawing it down and no longer employed.
Not according to this chart from the IRS: https://www.irs.gov/retirement-plans/co ... 457b-plans
(i.e., non-governmental 457b's cannot be rolled over to IRA's).
OP clearly stated that this was a GOVERNMENTAL 457 plan. Post #3 in the thread.
Geologist
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Re: Pension payout rollover - where to?

Post by Geologist »

Sandi_k wrote: Wed Apr 03, 2024 11:38 am
Geologist wrote: Wed Apr 03, 2024 9:46 am
Sandi_k wrote: Tue Apr 02, 2024 10:11 pm
Geologist wrote: Tue Apr 02, 2024 5:31 pm
Sandi_k wrote: Tue Apr 02, 2024 11:44 am

I would roll to a 457, for the Backdoor Roth reason, as well as the "claiming age." The 457 plans have no age restrictions. You can claim at any age - you don't need to be 55, or 59 1/2.
The OP, however, might want to be careful about choosing the 457 of their new employer, because the rules governing nongovernmental 457 plans are much less favorable than for governmental 457 plans (see the wiki for some of the complexities: https://www.bogleheads.org/wiki/457(b)).
True. But they can roll to the 457 until age 59.5, and then move from the 457 to the IRA once drawing it down and no longer employed.
Not according to this chart from the IRS: https://www.irs.gov/retirement-plans/co ... 457b-plans
(i.e., non-governmental 457b's cannot be rolled over to IRA's).
OP clearly stated that this was a GOVERNMENTAL 457 plan. Post #3 in the thread.
In fact in Post #3, the OP writes "If I go with 457, I have two options -- with my current (soon to be old government plan) or my new (nongovernmental plan)." So in fact there are two 457 plans at issue.

All my posts about nongovernmental 457's are to warn the OP that the new 457 (nongovernmental) is probably one to avoid.
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Sandi_k
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Re: Pension payout rollover - where to?

Post by Sandi_k »

And the fact that the OP made that distinction in the post means that they understood the difference.
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