Retirement-financial-planning is a lifelong process. In conjunction with retirement, it’s quite common to roll over retirement-plan assets from an employer-based plan (457(b), 401(k), 403(b)) to an IRA. Depending on personal circumstances, this may or may not be beneficial.

Let’s consider four important benefits:

  1. Bankruptcy Protection: Your creditors have access to your IRA assets that are in excess of $1,362,800, while your employer-based retirement plan accounts are entirely protected from your creditors.
  2. Age 50 Access to Funds: Public-safety employees may retire as early as age 50 and make penalty-free withdrawals from employer-plan accounts. IRA owners must be 59.5 years old before they can access their funds without penalty.
  3. Borrowing: Loans may be granted by employer-based plans. Individuals cannot borrow IRA funds.
  4. Working past age 70.5.: If the employee plan allows, Required Minimum Distributions (RMD) may be delayed until April 1 of the year following the year the employee retires. IRA owners are subject to RMDs even if working past the age of 70.5.

It’s unwise to purchase a commercial annuity with employer-based-plan funds. The commercial annuity income rates are much lower than the ones adopted by defined-benefit pension plans including the Social Security system.

My client Bob is thinking of purchasing an annuity with $250,000 from his Deferred Comp account. The Metropolitan Life Insurance Company will guarantee him an annuity income rate of 0.0624, or $15,600 per year beginning at age 65, while Bill’s New York City Employees Retirement System (NYCERS) would guarantee him 0.10654, or $26,635 per year, if Bill was allowed to purchase an annuity from his NYCERS. Current law does not provide for this benefit.

That being said, current law does allow participants of the 403(b) Plan of the Teachers’ Retirement System of the City of New York to use their 403(b) funds to purchase a lifetime annuity from TRS. And $250,000 will buy a 65-year-old retiree an annuity income rate of 0.09728, or $24,320 per year. It’s time for the other unions to wake up.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at

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