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fsw5279
New Member

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

 
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Critter
Level 15

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

Money saved in a 457 plan is designed for retirement, but unlike 401(k) and 403(b)plans, you can take a withdrawal from the 457 without penalty before you are 59 and a half years old. ... There is no penalty for an early withdrawal, but be prepared to pay income tax on any money you withdraw from a 457 plan (at any age).

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Critter
Level 15

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

Money saved in a 457 plan is designed for retirement, but unlike 401(k) and 403(b)plans, you can take a withdrawal from the 457 without penalty before you are 59 and a half years old. ... There is no penalty for an early withdrawal, but be prepared to pay income tax on any money you withdraw from a 457 plan (at any age).

fsw5279
New Member

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

Thank you...I was told that the check would already have federal and state taxes taken put before I receive it..would I have to pay ADDITIONAL income taxes on it, even thought taxes will have aleady been  taken out?
Critter
Level 15

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

Probably not ... since the amount is so small.
fsw5279
New Member

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

I was thinking the same...I will verify with the company as well. Thank you for your help.
dmertz
Level 15

I was sent a letter from my former emplyer that my 457 Retirment Plan contributions would be sent in a lump sum ($441). I am under 55, would I still have a 10% penalty?

What will be withheld is 20%, the minimum amount required by law.  The actual tax liability that you incur will be determined by your marginal tax rate for ordinary income.  If you fall in, say, the 25% federal tax bracket, the 20% withheld for taxes won't quite be enough and the remainder will need to come from withholding on other income, estimated tax payments, or a payment made for a balance due on your tax return.  A similar calculation would be necessary to determine your state tax liability.

You can continue to defer the income by rolling it over to a traditional IRA, but once rolled over the money will become subject to the possible 10% penalty for early distributions from a traditional IRA.  If the money is moved by the 457(b) plan administrator directly to an IRA, the mandatory tax withholding is avoided.

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