When you leave a job your 457 retirement plan doesn’t have to stay behind. You’re allowed to leave your money tax sheltered by moving your 457 plan to your new company or rolling over the funds to an IRA. If you plan on staying at your new company for a long period of time, moving your old 457 funds to an IRA might be the better option. Most 401k and 457 plans offer limited investment options, and using an IRA with your previously-saved dollars can help you better round out your investment diversification.
Choose an IRA. If you prefer to identify investments, perform research and place trades alone, look toward online brokerage firms to save money. If working alone isn’t for you, explore full-service brokers to be paired with an advisor or broker who holds licenses to help you pick suitable investments. Ask friends for advisor recommendations and check their experience and complaint record at the Financial Industry Regulatory Authority BrokerCheck website.
Open your new IRA plan. Complete paperwork carefully to open your new IRA before rolling over your 457 because you’ll need IRA trustee and account information for the rollover paperwork. Make sure and complete the beneficiary information also to ensure that your money passes on to those who you wish to have your funds if you can’t use them.
Fill out rollover paperwork carefully. You should start with a phone call to your 457 plan provider to see if they have their own rollover forms. If not, complete forms with your new IRA provider. If you chose a full-service form, they’ll bulldog this process on your behalf. If you’re using an online broker, navigate to the transfers and rollovers section using the search feature on the website. Look for paperwork to rollover a 457 plan. In most cases, this is the same form used to rollover a 401k.
Track the flow of your money from the old 457 to your new IRA. This process should only take a few weeks. If it seems to be stretching into a longer time, call your new IRA provider to find out about the hold up. Your new IRA company has people responsible for moving money to the firm fast. In some cases they may ask you to call the 457 provider to speed the process.
File your income taxes correctly to complete the process. Your 457 company should send a 1099-R which shows your disbursement from the company plan. Review box 7 to find the letter “G”. This tells the IRS that your funds were legally rolled to an eligible retirement shelter and not tax is due. Fill in your rollover amount on line 12a if you use Form 1040A, or line 16A if using Form 1040. Place a “0” on line 12b for Form 1040A or 16A if using Form 1040. This shows you transferred the whole amount of your 457 to an IRA. Write “rollover” next to this line on your tax form.
As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.