In our last article we discussed what the 457b retirement plan is. In this article we will go into detail about the Roth 457 retirement plan. Here are the key details of the Roth 457 retirement plan.
•Contributions are made post tax (taxes paid)
•Earnings grow tax free
•Withdrawals made are tax free if they are a “Qualified Distribution”
•Qualified Distributions are
- A period of 5 years has passed since Jan1 of the year in which the first contribution was made to your Roth Acct.
- You are at least 59 1/2 years old
•2023 max limit = $ 22,500
•If over 50 – catch up contributions = $7500, total = $30,000
•Total to invest in both 457 and Roth 457 is $22,500
•**Post tax contributions cannot be taken out until age 59 ½ or separation of employment
•Money can be transferred from 457 to Roth 457 – “In plan conversion” …taxes will be paid on total amount transferred
So, the big takeaway for the Roth 457 is that it is a post-tax retirement account compared to our regular 457b, which is a pretax retirement account. Our contributions and earnings will grow tax free, but we will have to wait to age 59 1/2 compared to the 457 which we can start withdrawing at any age as long as we have a separation of employment. Also be aware that even though this is a Roth account, you are unable to access your contributions until you are age 59 1/2 or there is a separation of employment. This is different than a regular Roth IRA which your contributions are always accessible because taxes have already been paid on them. Depending on what your goals are in retirement it is beneficial to have access to both pretax retirement accounts and post-tax retirement accounts.