When it comes to retirement planning, you have several options to help grow your savings over time. One of these options is a 457 plan, often available to government employees and some non-profit workers. But what happens when you leave your job, or if you decide you want to combine your retirement accounts for easier management? Can you roll over a 457 plan into an Individual Retirement Account (IRA)?

Let’s dive into the details to help you understand your choices better. The original article that inspired this post can be found here.

What is a 457 Plan?

A 457 plan is a type of retirement account primarily offered to government employees and certain non-profit workers. This plan allows you to save money for retirement and offers the advantage of tax-deferred growth, meaning you won’t pay taxes on your earnings until you withdraw the money in retirement.

What is an IRA?

An Individual Retirement Account (IRA) is another tax-advantaged retirement savings account, but it’s not tied to an employer. There are several types of IRAs, including Traditional, Roth, and SEP-IRAs, each with their unique benefits and limitations.

Can a 457 Plan be Rolled Over into an IRA?

Good news: You can generally roll over a 457 plan into an IRA. Doing so can offer you greater flexibility in how you manage your retirement savings. But there are some important considerations to be aware of:

Tax Implications

If you roll over a 457 plan to a Traditional IRA, the tax treatment remains relatively similar—both offer tax-deferred growth. However, if you decide to roll it over into a Roth IRA, you’ll need to pay taxes on the amount you convert since Roth IRAs are funded with after-tax dollars.

Costs and Fees

Before making the move, inquire about any costs or fees associated with the rollover. These charges could eat into your retirement savings, so it’s crucial to be aware of them beforehand.

Investment Choices

IRAs generally offer a wider array of investment options than 457 plans. If having more control over your investment choices is important to you, rolling over to an IRA might be beneficial.

How to Execute the Rollover

1. Open an IRA Account: If you don’t already have one, you’ll need to open an IRA account.
2. Contact Your 457 Plan Administrator: Notify them that you want to roll over your funds into an IRA.
3. Select Direct or Indirect Rollover: With a direct rollover, the funds move directly from your 457 plan to your IRA. With an indirect rollover, the money is paid to you, and you have 60 days to deposit it into an IRA.
4. Review and Submit the Necessary Paperwork: Follow the instructions provided by your 457 plan administrator and your new IRA custodian.
5. Monitor Your Accounts: Confirm that the funds have been successfully transferred and begin making investment choices in your new IRA.

Conclusion

Rolling over a 457 plan into an IRA is generally an option for most people, and it can offer benefits such as greater investment flexibility and easier account management. However, it’s essential to understand the tax implications and any associated costs before making such a decision.

If you have questions about rolling over a 457 plan, or any other financial planning concerns, please don’t hesitate to reach out to Shah Total Planning. Our team of wealth management and legal professionals are here to guide you every step of the way.

Ready to make your money work for you? Contact Shah Total Planning today for personalized financial guidance. We’re here to help you navigate your retirement planning options for a secure and prosperous future.

Financial planning can be a complex puzzle, especially when it involves giving to charity while also trying to reduce your taxes. Good news: There’s a way you can combine the best of both worlds. For those who hold Individual Retirement Accounts (IRA), you have an option to donate to charity directly through a trust and get some tax benefits too. If you want to explore this subject more, you may want to read the original article from WealthManagement.com.

What is an IRA?

Before diving into the nitty-gritty details, let’s make sure we’re all on the same page about what an IRA is. An Individual Retirement Account (IRA) is a way to save money for retirement that also offers tax advantages. People contribute a part of their income into these accounts so they can enjoy a financially secure future.

Why Use a Trust?

A trust is a legal entity that holds and manages assets for the benefit of certain individuals or organizations. The person who creates the trust (known as the grantor) can set rules for how the trust’s assets are to be distributed.

The Mechanism for Charitable Giving Through an IRA and a Trust

The U.S. tax code allows for a specific kind of donation called a Qualified Charitable Distribution (QCD). A QCD is a direct transfer of funds from an IRA, owned by someone 70½ years old or older, to a qualified charity. This type of donation can be up to $100,000 per year.

To make this process more secure and aligned with your wishes, you can route these funds through a trust. The trust will act as a ‘middle-man,’ ensuring that the money reaches the charity you want to support, exactly the way you intended.

The Tax Benefits

By doing this, not only are you contributing to a good cause, but you also get to enjoy some tax perks. Usually, distributions from an IRA are taxable income. However, when you use a QCD, those funds are not considered taxable income. Plus, you also get to claim a charitable deduction on your income tax return.

Important Considerations

There are, however, some rules and guidelines you must follow to make sure everything goes smoothly. For instance, the IRS requires that the QCD be a direct transfer from the IRA to the charity. Also, it’s crucial that the trust is drafted correctly to ensure it qualifies for the charitable deduction.

Understanding the options for charitable giving through your IRA and a trust can provide significant financial and tax advantages. However, the legal and tax implications can be complex. That’s where the expertise of Shah Total Planning comes into play. We offer comprehensive financial planning, including estate and tax planning services, tailored to your unique situation.

To make sure you’re maximizing your charitable giving and your tax benefits, reach out to Shah Total Planning for a consultation today.

Remember, smart planning today can lead to a better tomorrow.

When is the last time you checked in with your retirement contributions? Now might be the perfect time to look up automatic withdrawals from your paycheck to see if you’re maxing out your retirement savings in the best way. If it’s been some time since you reviewed your financial plan overall, consider this the perfect reminder to sit down with your financial expert and discuss goals for 2023 and beyond. As the end of the year approaches, there may be changes you can make that set you up for success.

With the change on New Year’s Even from 2022 to 2023, remember that you may have more options to save for your retirement in the near future. There are increased IRA and 401K contribution limits. The IRA contribution limit increases for a total increase by $500 to a total of $6,500 for anyone age 50 and older. Bear in mind that you also have the possibility of an annual ketchup contribution limit. This increases by $1,000 to a total of $7,500 for  401ks. The amount that maximum amount you can contribute to a 401K plan in 2023 has increased two $22,500. This is an increase of $2,000 and impacts the majority of 457 plans, the Thrift Savings Plan for the government, and 403b plans.

Make sure that you schedule a consultation with an experienced and qualified financial planner to discuss all of your planning options and to determine the most appropriate courses of actions for your needs. Planning ahead for your financial future with retirement is just one aspect of comprehensive financial planning, although it is an important one.

Our office is here to guide you and to answer your questions as they come up around retirement planning. Set up a late 2022 or early 2023 meeting to walk through your financial strategies with Shah Total Planning today.

Before rolling anything over or adjusting your plan, you need to be sure you’ve thought of all possible consequences and issues. Failing to do so can put you in a difficult position. For example, if you rollover your IRA but don’t realize the impact of fees, this can damage your retirement savings and your overall financial picture.

It might make sense in your present situation to rollover your IRA, but make sure you’re aware of all of the potential consequences and fallout. A study found that workers are not always better served by keeping money in their workplace plan. Although IRAs have some advantages, they are not always less expensive. In 2018, over $516.7 billion was rolled over from workplace retirement plan into traditional individual retirement accounts. IRA rollovers could cost Americans billions of dollars in fees, however, according to a Pew Charitable Trust study.

Although 46% of recent retirees rolled at least some of their workplace retirement funds into an IRA, another 16% of those close to retirement plan to do so as well. Bear in mind that approximately 15% of 401(k) plans do not allow employees to retain funds in the plan when they retire. The typical hybrid 401(k) fund is 0.19 percentage points less expensive than the same fund available to IRA investors. That is a fee differential that might seem minor in the short term but can really add up over the course of time.

For example, Pew determined that of those who rolled over their investments in 2018, they would have lost collectively $980 million in one year due to extra fees. Make sure that you’re partnering with an experienced and dedicated financial planning firm to keep you aware of how any changes in your strategy, especially rollovers, can influence your future.

Talk to our office today about a holistic approach to your financial strategies. We believe all the small steps add up and we’ll help you chart a course for the future effectively.

Who needs to know what you’ve included on beneficiary forms? How does this make your estate planning easier or harder? 

An advisor who is not kept in the loop about your IRA decisions can become extremely confused or could even delay the process of your loved ones getting the necessary benefits after you pass away.

A common question asked by financial advisors who haven’t been kept in the loop is: where is the beneficiary form? One of the most valuable services that you can provide as a client of a financial advisor is to explain your decision-making process and provide your financial advisors with information about who you have chosen to be the beneficiary or primary in contingent beneficiary on your IRA.

More in depth planning conversations can be had between you and your financial advisor when he or she is aware of your decisions.

The beneficiary form review is important because as life circumstances change, you may need to update these materials and updating your other estate planning documents without also considering how the IRA beneficiary form can be affected could be a big mistake.

Beneficiaries could be forced to face unnecessary and unfortunate legal, financial and tax obligations. If this person is not clear in advance that they were named as a beneficiary in your IRA, they may struggle to figure out how to distribute these funds if there are no clear instructions, or more legal challenges. This often means expensive and time intensive family and legal disputes that don’t end well and can even rip families apart.

These mistakes can be very easily avoided by verifying that your beneficiary forms are updated accurately when you have told your financial advisor about what these include. Scheduling a consultation with your financial advisor at the same time that you review your estate planning documents with your estate planning lawyer on an annual basis can help to ensure that all of your individual needs have been taken into account.