Dear Liz: I’m a government employee with a 403(b) supplemental retirement plan. I’m taking a new job out of state and wonder what to do with the money in this account. Should I leave it in the plan, which has been doing great, or transfer it to my new employer’s plan? Also, I have a little money, about $8,000, in a 457(b) deferred compensation plan that I would like to remove for simplicity. Can I transfer this into a brokerage IRA without any tax hit?
Answer: You mention that your current plan has been “doing great,” but it would be surprising if that weren’t the case. As of mid-October, the one-year return for the Standard & Poor’s 500 market benchmark was about 34%.
If your new employer’s plan is a good one, then transferring your money there could be a great option since you’d have fewer accounts to manage and monitor. How can you tell if a plan is good? You’ll see a number of low-cost investment options with expense ratios well under 1%. If you’re a teacher, you can find ratings of school district 403(b) plans at the nonprofit 403bwise (https://403bwise.org/).
You’re allowed to roll your deferred compensation plan into an IRA or your new employer’s retirement plan. You may want to keep the money where it is, however. Once you leave an employer, you’re allowed to access a 457(b) plan at any age without paying a 10% early withdrawal penalty. That could be a perk worth keeping.
My wife turns 65 next June. She wants to keep working till 67. My understanding is she has to get on Medicare at age 65. Once on Medicare she can only make around $18,000 per year. Right now she makes around $140,000 to $160,000 a year. She has saved plenty in investments so that’s not a problem. Is there anyway she does not have to get on Medicare and not be penalized ?
I think you’ve confused Social Security and Medicare. Social Security has an earnings test if you start benefits before your full retirement age. Medicare doesn’t have an earnings test. It does have surcharges for higher-income people, but that starts at modified adjusted gross income of $206,000 for married couples. Now would be a great time to talk to a fee-only, fiduciary financial planner, because retirement involves a lot of potentially irreversible decisions and you want to make the best choices possible.