I have a deferred compensation plan with my employer and I want to take my money out, however, I've been told by the company that I cannot touch it becasue it's pretaxed. I don't see how this is legal. There must be someway to get the money. After all, it's MY money. If anyone has any good answeres, I'm all for it.
2006-10-25 03:34:35 · 3 answers · asked by gablueliner 3 in Business & Finance ➔ Personal Finance
Apparently you are employed by a government entity (city, county, state, etc.). Generally investments in deferred compensation plans such as 457s, 401(k)s, 403(b)s are not available to you while you are still employed. There are hardship exceptions (see irs.gov for those). Your plan might offer loans against the 457 but it's not a great idea as the money is not earning anything for you while it's loaned out (you are paying the interest back into your own account). If you withdraw money you must pay income taxes on the earnings (any account value above what you contributed and the earnings come out first) and you must pay a penalty (10% last I knew) on the entire withdrawal unless you reach age 59 1/2 the year you make the withdrawal.
Leave your money in there (and keep contributing). Don't mortage your future. Pay yourself first and then find a way to live on what's left in your paycheck.
2006-10-25 07:25:30 · answer #1 · answered by Anonymous · 0⤊ 0⤋
457 is the tax code section defining the plan. A 457 is the 401(k) for government employees. The specific terms of the plan depend on the employer and the plan administrator. What you have been told is probably correct. But you really do not want to withdraw it anyway. Here's why--in addition to having to pay tax on the withdrawal, reducing the amount you actually receive by whatever tax barcket you are in, you also have to pay a 10 percent penalty for withdrawing before retirement. If you need some money for an emergency, ask about borrowing against your 457. Most employers allow this. You avoid the penalties, and the interest rate is generally lower than an unsecured loan from a bank or credit union. Also, 457 contributions are voluntary. If you find that you are not keeping enough net pay after deductions, ask you employer to reduce the amount taken from your check.
Careful, though, if your employer "matches" any of your contribution, and you reduce your contribution to below the amount that your emplyer matches, then you are throwing away free money.
2006-10-25 04:14:24 · answer #2 · answered by Alan B 2 · 0⤊ 0⤋
The Roth isn't challenge to earnings tax for you or your heirs. The 457 is challenge to earnings tax. in case you like to establish a charitable the rest believe, you decide on an sources lawyer.
2016-12-28 04:40:12 · answer #3 · answered by ? 3 · 0⤊ 0⤋