I just found out that I made a mistake in my employee retirement plans. I mistakenly contributed to 3 types of plans instead of 2-- a 457b, a ROTH 401k and a regular 401k.
I only wanted to contribute money to the 457b and ROTH 401k.
Now, I have $1,306 in an extra account I didn't want (regular 401k).
Will I now receive 3 separate checks from my 3 accounts when I retire? This is a pain in the neck, because I now have to keep track of 3 accounts, each of which is treated differently by the IRS. And, to have this extra headache for such a small amount of money is really annoying, especially for a guy like me who is always looking to streamline and simplify things.
I was hoping I could consolidate accounts by rolling money from my regular 401k into my 457b or ROTH 401k, but I can't.
Is there anything else I can do to simplify things short of just liquidating the 401k account now, and getting hit over the head with a 10% penalty?
What really annoys me is why on earth would a company that offers a 457b plan also offer a regular 401k plan??? What's the point? They're the same thing, except the 457b is better, since you don't get a 10% tax penalty if you withdraw the money early. I would have never made the mistake I did if this was never offered to begin with.
To complicate matters more, I plan on retiring at around age 50, and I will use the IRS 72 (t) rule to avoid paying a 10% tax penalty for early withdrawals from my accounts.
Now that my accounts are so fragmented, it will get even dicier and more complicated to use this rule to my advantage.
Should I take a small percentage from all 3 accounts simultaneously? Can I?
Or, should I take the majority of the money from this 401k (assuming it grows to a few thousand in 10 years), so I will liquidate this account first? How can I simplify things?
Annoying retirement account mistake
I believe the reason an employer will have both a 457 & 401 plan available to employees is that you can contribute to both up to the limit for each. That is, if your limit is $17,000 for each, you can contribute up to $34,000. Very few people take advantage of this ability to super save, but its out there for an employee.
As for early retirement, if that's your plan, you should be maxing out the 457 plan (for the reason you mentioned). As far as I know, when you take money out you can specify which plan you are pulling the funds out of. Your HR department should be able to give you details in that area. Personally I don't think you'll have any problems when you want your money. Plus if your administrator for each plan is the same, do they give you a unified interface for all your accounts? Mine does (457 & 457 Roth are with one administrator), so the split accounts gives me no extra paperwork to track.
As for early retirement, if that's your plan, you should be maxing out the 457 plan (for the reason you mentioned). As far as I know, when you take money out you can specify which plan you are pulling the funds out of. Your HR department should be able to give you details in that area. Personally I don't think you'll have any problems when you want your money. Plus if your administrator for each plan is the same, do they give you a unified interface for all your accounts? Mine does (457 & 457 Roth are with one administrator), so the split accounts gives me no extra paperwork to track.
If you made the mistake just now (in 2012), you may still be able to undo it without any fees or punishments? As I understand it, the 401k is pre-tax money and the Roth 401k is posttax money, so maybe you can have the 401k money put into a Roth 401k after subtraction of taxes.
But I'm from the Netherlands, so I'm not sure. I would talk to your retirement plan provider.
But I'm from the Netherlands, so I'm not sure. I would talk to your retirement plan provider.
Those aren't like pension plans. You don't have to take distributions from them all each month. Basically, you can just let it sit until you need it. If $1,300 is all you ever put in that account you will probably be able to just clean it out in retirement with just one transaction.
I highly doubt you can move money around like you want. It's supposed to be difficult to get to the money once you put it in or most people would spend it before retirement.
I highly doubt you can move money around like you want. It's supposed to be difficult to get to the money once you put it in or most people would spend it before retirement.
Another mistake I just made was not realizing that I can contribute 17k a year to my 457b AND 17k a year to my regular 401k.
This being the case, I will probably now max out my 457b and regular 401k, and leave the Roth 401k.
I previously thought that I can only contribute $17,000 a year into my deferred accounts. That's the only reason I put the other 17k into the Roth to begin with.
I am thrilled to learn that I can shelter $34,000 a year from taxes until I retire.
This being the case, I will probably now max out my 457b and regular 401k, and leave the Roth 401k.
I previously thought that I can only contribute $17,000 a year into my deferred accounts. That's the only reason I put the other 17k into the Roth to begin with.
I am thrilled to learn that I can shelter $34,000 a year from taxes until I retire.