457b Plan

457b Plan

Have you set up a 457b account via your employer? Do you ever wonder how and if you can purchase dependable physical gold, using your 457? Below, we will outline the details of 457 plans, and explain how investing in precious metal works. Also, we will cover how you can protect your retirement assets from erratic market behavior.

What is a 457b Plan

457b plans get their name from the position they occupy in the code outlined by the Internal Revenue. Frequently, the names in this code are abbreviated to ‘457 Plans’.

457b plans share many similarities with other tax deferred, employer funded retirement programs, such as the 403b and 401k programs. As defined contribution programs, 457b plans allow participants to subtract income from their wages, to be used in tax free savings accounts.

Originally, 457b programs were established in 1978. They were designed to offer a different defined contribution program for two particular kinds of employers: non government, tax exempt employers (like charities and hospitals) and government employers. Non governmental and governmental 457b programs have a few different rules. The biggest variation is that, with public governmental 457b plans, the employer has to fund them. In contrast, virtually all non governmental 457b plans are not employer sponsored (doing this would invalidate the account’s tax advantages, in accordance with ERISA regulations).

Furthermore, the majority of 457b programs provided via private firms restrict their membership to well paid staff, such as managers.

All 457bs use plan administrators and plan providers, and the participants are only offered investment options in line with the specific design of each plan.

Restrictions and Rules Relating to 457b Plan Rollovers

Regrettably, you can not roll non governmental 457b programs into a retirement plan, like an IRA (Individual Retirement Account) or a 401k. This money is only allowed to be transferred to a different tax exempt 457b program.

You can move governmental 457b cash into the 403b, 401k or 457b of your new employer ˗ but only with plans that accept these transfers ̵ or into Rollover IRAs. Cash from governmental 457bs is not governed by the age 59.5 withdrawal clause, which means that cash can be taken out (with income tax charged on the total amount), without being subject to a ten percent early withdrawal fee. Another possibility, when changing employers, is to keep the cash in the same place, if your program permits.

This is a summary of a few rollover rules relating to governmental 457bs:

  • Once you get the money from the 457b to do a rollover, there is a sixty day time limit to carry out the procedure. In the event that you miss this deadline, the IRS will regard your  cash as taxable.

  • You’re restricted to a single rollover per twelve months into an IRA, from a 457b. This twelve month time frame starts on the day that you get your 457b money. This is applicable  to every IRA you own individually.

  • You are unable to use the money from your 457b to buy investments, during the period between getting your 457b funds and setting up your IRA.

You are best advised to carry out a ‘direct rollover’ of your 457b money. With direct rollovers, you do not get a distribution check. Instead, your 457b program provider will move the cash straight into your new IRA program.

Gold Types That can be Purchased via a 457b Program

While your options are restricted to your program provider’s discretion, 457b programs are allowed to feature:

  • Equity indexed, fixed and / or variable annuities

  • Mutual funds

  • Individual bonds and stocks

  • ETFs (exchange traded funds)

Essentially, this means that physical gold cannot be purchased via a 457b program. The easiest way to purchase in gold via a 457b program is to buy gold mining company stocks, or mutual funds that include stocks from mining companies. This is also known as purchasing ‘paper gold’. You can invest in gold indirectly as well, using mining ETFs and GLDs (gold ETFs).

Paper Gold vs Physical Gold ̵ Comparing Investments

Usually, gold stocks rapidly fall in price, whenever gold prices fall. Similarly, when gold spot prices increase, gold stocks typically rise in value fast. This is why buying physical gold is less risky than investing in gold stocks.

Plan Type Sponsorship 2015 Contribution Limit Roth Option? Allow Gold Stocks? Allow Gold ETFs? Allow Gold Bullion
401(k) Private Employer $18,000 / $24,000 Yes Maybe Maybe No
Solo 401(k) Self-employed $18,000 / $24,000 Yes Yes Yes Yes
Keogh Plan Self-employed or Unincorporated Employer $53,000 No Maybe Maybe No
403(b) Government or Non-profit Employer $18,000 / $24,000 Yes Maybe Maybe No
457(b) Government or Tax-exempt Employer $18,000 / $24,000 Yes Maybe Maybe No
Simple IRA Private Employer $12,500 / $15,000 Yes Yes Yes Maybe
SEP IRA Business Owners & Self-employed $53,000 Yes Yes Yes Maybe
Profit Sharing Plan Private Employer $53,000 No Maybe No No
Money Purchase Plan Private Employer $53,000 No Maybe Maybe No
Annuity Individual None No Maybe Maybe No
ESOP Private Employer Varies Yes Maybe No No
SARSEP Private Employer $53,000 No Yes Yes Maybe
Self Directed IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Traditional IRA Individual $5,500 / $6,500 Yes Yes Yes No
Precious Metals IRA Individual $5,500 / $6,500 Yes Yes Yes Yes
Thrift Savings Plan (TSP) Government or Military $53,000 No No No No

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