• Question
  • 457 Plan Conversion

    Asked by a 65 year old man from Shelton, WA on 5/4/2018

    I am 64 years old. I currently have a significant amount of funds in a 457 account. I do not need any of these funds to fund my retirement. Does it make sense for me to do a conversion to a Roth IRA with these funds. With the new tax rates I am in the 24% bracket. My income for 2018 (estimated) will be approx. $114000. Would it be a good idea to rollover just enough funds to keep me out of the 32% bracket, with intentions of repeating this practice again and again until my regular retirement income reaches the 32% bracket. I have enough money to pay the tax with funds outside of my 457 account.

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  • Categories: Taxes, Retirement Planning

Answers

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  • If you believe that tax rates will be higher in the future, then converting your 457 account may be a good idea. You have brought up several good points to consider.

    - recognizing that every year you will need to calculate the amount to convert based on your income and tax bracket limits
    - you are able to pay the taxes on the conversion with money outside the 457 account (to avoid paying tax penalties on the money used for taxes)
    - you appear to have an income stream that covers basic needs, having money in a Roth will you give more flexibility and avoid rmds
    - you are only 64, you may have 30 more years of retirement to benefit from tax free growth

    It appears that you may be a good candidate to do annual conversions.

  • Login to rate this answer:   Answered on 5/8/2018
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.