I inherited a pre-tax 457(b) account a couple of years ago, and would like to consolidate brokers to simplify my finances. I have a couple of options, and I have been unable to find a clear answer through Google, so I'm trying here.
Background: My father passed away in 2015 and my mother inherited his 457(b) account as a spouse beneficiary. She passed away in 2021 and my brother and I inherited it as non-spouse beneficiaries.
I know that the simplest option is to roll it over into an inherited IRA with my primary broker. However, I also plan to retire in the next 2 years, which opens up the possibility of simply holding onto it with the current custodian (paying the $60 per year fee), and taking the RMDs until I retire. It *appears* that I can then convert the remaining balance to an inherited Roth IRA and pay the taxes due at my then much lower tax rate.
I have found clear language from the IRS that I cannot convert an inherited IRA to an inherited Roth IRA, but I cannot find any clear language about whether or not I can convert from an inherited 457(b) to an inherited Roth IRA. I currently have a large traditional 401K that I plan to do managed conversions to a Roth after retirement, but I like the idea of getting as much into Roth space as I can, even if it is only for a few years (RMDs on the Inherited Roth). I also have an even larger taxable brokerage account, so access to money for paying taxes on the conversion is not an issue, nor will I need the money from the 457(b) for living expenses.
The current custodian has a form for me to fill out for a roll-over to a different custodian, and this form has an option to indicate that I want to roll the 457(b) into a Roth IRA, but it doesn't say anything about whether the 457(b) is a regular 457(b), a spouse inherited 457(b) or a designated beneficiary 457(b).
My questions:
Background: My father passed away in 2015 and my mother inherited his 457(b) account as a spouse beneficiary. She passed away in 2021 and my brother and I inherited it as non-spouse beneficiaries.
I know that the simplest option is to roll it over into an inherited IRA with my primary broker. However, I also plan to retire in the next 2 years, which opens up the possibility of simply holding onto it with the current custodian (paying the $60 per year fee), and taking the RMDs until I retire. It *appears* that I can then convert the remaining balance to an inherited Roth IRA and pay the taxes due at my then much lower tax rate.
I have found clear language from the IRS that I cannot convert an inherited IRA to an inherited Roth IRA, but I cannot find any clear language about whether or not I can convert from an inherited 457(b) to an inherited Roth IRA. I currently have a large traditional 401K that I plan to do managed conversions to a Roth after retirement, but I like the idea of getting as much into Roth space as I can, even if it is only for a few years (RMDs on the Inherited Roth). I also have an even larger taxable brokerage account, so access to money for paying taxes on the conversion is not an issue, nor will I need the money from the 457(b) for living expenses.
The current custodian has a form for me to fill out for a roll-over to a different custodian, and this form has an option to indicate that I want to roll the 457(b) into a Roth IRA, but it doesn't say anything about whether the 457(b) is a regular 457(b), a spouse inherited 457(b) or a designated beneficiary 457(b).
My questions:
- Can anybody point me to any IRS document that says what I want to do is/is not allowed?
- Is it worth the effort?
Statistics: Posted by DrMark — Tue Oct 22, 2024 6:39 pm — Replies 5 — Views 191