I know the answer is generally no but this is slightly different.

My wife has a pretty small 457b from when she worked part time for the state for a year.
She has not worked there for 5 years now and were informed inactivity fees are about to commence. Fees are currently $100 a year going to $200.
My wife put no money into this account ever it was all employer contributions. Frankly we forgot all about it as that job was just a little side thing and her other employer matched 2 to 1 with no limit so we were maxing that.
The account sits at $5,000 it is state controlled and can’t be rolled to her other employer retirement accounts only to a private IRA. That at this point we would not contribute to as we aren’t maxing out our current employers retirement accounts (funding them nicely just not maxing them currently).

My understanding is that since she is no longer employed there if she cashed it out it is just taxed like regular old income with no penalty.
If we cash it out I can pay for a year of one of the boys private school tuition and save 4%.
So essentially we are loosing income tax minus 4% on money we never contributed.

Rolling it over to a private IRA is surprisingly easy, and you preserve any tax advantages.

I would roll it over into a Vanguard index fund and let it ride.

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Roll it, you got time to grow it.

Another thing I forgot to add.
The middle boy who this would pay for school has not reached kindergarten so it counts as child care and can be deducted from ones taxes. Or at least it used to be I don’t know what all the new tax stuff messed with.

I thought she had to be of a certain age (55?) to avoid an early-withdrawal penalty.

Roll it into an index fund IRA with Fidelity. You'll be glad you did.

I would cash it out. It’s also my understanding that in our state you can draw the money without penalty once your employment with the state/local government is terminated. I don’t trust our state government for a second so I would pull the money out. What you do with it from there is your call.

I have a 457 account that I contribute to every check. I’m about to end that and start a private fund so it’s out of the states hands. People have told me that the state can’t touch the money in my 457, and this may be true, but I’m paranoid about what the state will do with the retirement system in such a mess.

I think you're correct on no 10% penalty for 457b but you would be subject to fed income tax as noted, and it would increase to total taxable income by whatever amount is cashed out. Not sure on your state rules. Usually the administrator will take a fixed amount of fed/state tax out unless you tell them to take more. The good news is if your effective tax rate (and your adjusted gross income) is lower now due to lots of deductions, you may not even be hit that hard. Though I would make sure you're not anywhere near breakpoints in the tax code where you could lose credits and can't take full deductions.

Roll to Schwab IRA, buy a Vnaguard index fund, and forget about it.

Interesting that so many think they know your investment objectives, time horizon and risk profile sufficiently to recommend one or another of the big name index fund providers, never mind they aren't saying which index would meet your unknown objectives etc. Besides that it isn't the question you asked.

For your consideration: investment choice aside,

If you take it out now you have income tax and as far as the info you gave, the pre-55 additional penalty. It won't kill you but its money you could let grow.

If you don't need the dough, my initial advice, knowing what I know now, would be to roll over to an individual IRA.

quote:

Originally posted by Sig209:
I would roll it over into a FIDELITY index fund and let it ride.

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Fixed it for ya!
Fidelity has lower fees, and hence better returns in their index funds than Vangaurd.

quote:

Originally posted by Black92LX:
Another thing I forgot to add.
The middle boy who this would pay for school has not reached kindergarten so it counts as child care and can be deducted from ones taxes. Or at least it used to be I don’t know what all the new tax stuff messed with.

If the child care expenses are deductible, you're saving 4% by paying upfront, and you're sure about the day care place, that's what I would do. Your income will go up by the amount taken out and be reduced by the child care deduction. I'd also take the monthly amount you would have paid for the child care and bump up your retirement plan contributions or get a supercharger for the Sienna.

quote:

Originally posted by wishfull thinker:
Interesting that so many think they know your investment objectives, time horizon and risk profile sufficiently to recommend one or another of the big name index fund providers, never mind they aren't saying which index would meet your unknown objectives etc. Besides that it isn't the question you asked.

For your consideration: investment choice aside,

If you take it out now you have income tax and as far as the info you gave, the pre-55 additional penalty. It won't kill you but its money you could let grow.

If you don't need the dough, my initial advice, knowing what I know now, would be to roll over to an individual IRA.

It is my understanding there is no pre55 penalty associated with a 457b if one is no longer employed by the entity where the account originated.

quote:

Originally posted by trapper189:

quote:

Originally posted by Black92LX:
Another thing I forgot to add.
The middle boy who this would pay for school has not reached kindergarten so it counts as child care and can be deducted from ones taxes. Or at least it used to be I don’t know what all the new tax stuff messed with.

If the child care expenses are deductible, you're saving 4% by paying upfront, and you're sure about the day care place, that's what I would do. Your income will go up by the amount taken out and be reduced by the child care deduction. I'd also take the monthly amount you would have paid for the child care and bump up your retirement plan contributions or get a supercharger for the Sienna.

They have been in years past. I do not know enough about the new tax plan that was just past for 2018 to know for sure or not.

We are positive about the school. The nice part is it is not a daycare. It is an actual preschool the kids will remain there until High School.

roll it over to a private IRA with someone like Fidelity

make the money do some work in this stock market

its free

Here ya go, this is from Kiplinger, always very informative and easier to figure out than IRS speak. You can find this at their site, I just clipped the parts germane to what you are doing.
You're right on the penalty free nature of this type of account.

(Snipped Comparison of 401 types and this one) But there are a few key differences. The biggest one is the rule for withdrawing money after you leave your job. With a 457, you can take penalty-free withdrawals at any age. With a 401(k), if you leave a job before the year you reach age 55, they will be a 10% penalty on any withdrawals before age 59 ½. Keep your money in the 457 after you leave your job, rather than rolling it into an IRA, if you may want to access the money before age 59½. If it’s in an IRA, withdrawals before then are subject to a 10% penalty.
Read more at https://www.kiplinger.com/arti...#hly5G8JwSaUiMMrA.99