Can I take distributions from a defined benefit pension from a former employer while making tax deferred contributions to a 457 plan at my current employer?

I am 54 years old and wish to retire early to travel with my wife. I have a pension plan from a university I worked at and terminated my employment 15 years ago. I can start drawing pension payments any time after 50 years of age. Currently, and for the past 15 years, I have worked for a state agency. I plan to retire at 56 years of age. It will be three or four years before I can access IRA funds. I have a 457 fund that I can access upon termination of my current employment with the state agency without a penalty. I would like to increase the amount in my 457 plan by maxing out contributions while I am still employed, and then use the 457 to bridge the time from retirement until 59.5 years of age when I can access other funds. From a tax and legal perspective, can I draw pension retirement checks and simultaneously contribute tax free to a 457 plan?

Financial Planning, Retirement, Pensions, IRAs, Taxes
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September 2018

Yes, you can take distributions from your pension from your old employer, while also making contributions to your current employer. But do keep an eye out for how that pension will affect your tax situation. It could possibly move you into a new tax bracket. If you have options of how that pension is paid out, be mindful of this when choosing an payout option. Typically that is a one-time decision, no do overs.

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