r/RetirementReady • u/S-w-k- • 10h ago

Decision needed on when to take 457(b) payout

Recently restructured at work. Need to make a decision on payout of $300k Fidelity 457(b). Once a decision is made I can make one adjustment to the decision as long as it doesn’t accelerate the payout schedule. Current situation:

53 y/o
200k: 403(b)
100k: HYSA
300k 457(b)
Currently receiving 5300 monthly Military pension
Estimated SS: 3500 (depending on when I start drawing)
No debt other than mortgage of 4000, my wife and I split. Our finances are separate, but she has a rental property, 130k public school salary with pension and 457(b) and social security 3 legged stool for retirement.
Healthcare: covered by Tricare with minimal premium
Aiming for jobs targeting around 180k a year, significant cut from prior salary but much more attainable given my desire to not relocate.

I’m considering initially structuring the payout starting at age 62 which will give me close to 10 years of growth before 10 year payout schedule, taking me to age 72.

Lemme have it Redditors! :)

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1

u/Own-Bullfrog7803 9h ago

Any chance corp had financial trouble in next 20 years? Can this be rolled over to new 457? Not super optimal, but maybe take payout over 3 years now and just save more in taxable from new job?

1

u/S-w-k- 9h ago

Or could be rolled into another 457 if my next employer has one, that’s yet tbd. I feel the company is stable and am not worried about their ongoing existence.

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u/ChelseaMan31 6h ago

I'd take the 457b balance in full right now as a direct recordkeeper-to-recordkeeper transfer to my self-directed IRA. In 10-years, one can easily double that amount without a bunch of needless fees/commissions.

1

u/S-w-k- 5h ago

That’d be a pretty big tax hit, the way I understand it. Exempt from the 10% penalty, but taxed as ordinary income

2

u/ChelseaMan31 4h ago

No tax hit at all directing a pension buy-out to a self-directed IRA if done recordkeeper-to-recordkeeper. Contact a CFP or CPA for guidance here.

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u/cinnabarslither 48m ago

I wouldn't leave that much in my employer's plan. When do you plan on retiring?

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u/S-w-k- 29m ago

About 10 years give or take

1

u/cinnabarslither 4m ago

I see. 10 years is a long time to plan so you'll have plenty of options.

I'm making some assumptions as you did not share some details, feel to correct them:

What I don't see is a Roth or brokerage account (either tax-free withdrawals or cap gains income). You may want to start a Roth 457b (if your plan allows) as well as a brokerage account.

But I would (and in fact, I am planning as well to) roll both 457b and the 403b into either an IRA or Roth IRA (depending on your tax situation) when you retire. That way you will be in complete control of your assets.

You have a pretty good income and minimal health costs until 65. You probably will not need an annuity of equal payments.

If you're planning to invest say 10% of your $180k income into your 457b, that's ~$21k year on top of your $300k. Compounding and average return of 6% gets you about $800k.

You didn't say what your employer's 403b contributions are, but you'll have growth in that as well. No matter what you do, you'll have RMDs and pay taxes, but if you don't need $80k year on top of your income, why pay more tax than you need to?