I want to rollover my 457b to a Roth IRA. Are there penalties for converting this prior to age 59 1/2? Can I do a monthly amount? Is there an annual limit?
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There is no annual limit for the rollover and no monthly options available. You will have to pay taxes on the rollover at any age. Before you rollover you plan, consider a few factors. Only distributions from your 457(b) taken after you've left the employer sponsoring the plan can be rolled over. Because your 457(b) plan offers pretax savings, and Roth IRAs offer the promise of tax-free distributions, there are tax consequences, 20 percent of your distribution is withheld for taxes and whole amount of distribution has to be included in your taxable income.
One thing to be aware of. Distributions from the 457(b) paid to you are not subject to any early-distribution penalty unless they come from a separate sub-account in the 457(b) that holds assets rolled over into the 457(b) from a qualified retirement account that was subject to early-distribution penalties on distributions paid to you. Assets in that sub-account would be available free of early-distribution penalty if distributed after separation from service in or after the year that you reach age 55. Rolling the money over the money over to a Roth IRA will make the amount rolled over from the traditional account in the 457(b) subject to an early-distribution penalty if distributed before the 5-year conversion holding period in the Roth IRA has been met or you reach age 59½, whichever comes first.
Also, if you are still working for the employer providing the 457(b) plan, in-service distributions from the 457(b) are generally not permitted before age 59½, so check with the plan. If you still employed with this employer and the 457(b) plan includes a designated Roth account, perhaps you can do an In-plan Roth Rollover to the Roth account in the plan instead of rolling over to a Roth IRA.
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