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My wife and I are doctors with 457(b) plans that we can’t roll over into IRAs. How should we take this money in retirement? 

‘Once you make a distribution decision, it can never be changed’ Dear MarketWatch, 

My wife and I are both physicians and we have been contributing to our employer-retirement plans since residency training. This includes Roth 403(b), tax-deferred 403(b) and tax-deferred 457(b) plans. I am 60 and my wife is 56, and we expect to continue working until our 70s.

I am just now looking at the 457(b) plan rules and, as this is not a governmental 457(b), the distribution options are limited, and include a lump sum, fixed amount over a set number of years, or single- or joint-life annuities. The main issue with these plans is once you make a distribution decision, it can never be changed. 

I don’t know if there are exceptions, but according to our plan representatives, it’s basically set in stone. I think there are also RMD requirements, but our plans also require that we begin distributions at age 70 1/2. It’s unclear whether or not these hold if we stay employed past 70 years old. 

If we keep saving at our current rate, I expect that our retirement savings will be distributed as follows: 20% in our 457(b)s, 40% in other tax-deferred plans, 20% in Roth plans, and 20% in an after-tax brokerage account.

We are not allowed to roll over into an IRA. One option is to use the plan early and distribute all the money within five to 10 years. Another option is to use the plans as a quasi-indexed annuity and withdraw the money over 20 to 25 years and, of course, we could pick the joint annuity option. 

If we do choose a life annuity or a long duration for withdrawals, how does that affect our RMD calculations for the other tax-deferred accounts?

One final caveat is the money belongs to the employer until it is completely distributed so, in theory, if the employer goes bankrupt, we could lose the balance of the accounts. I have very low concern that this could happen but it’s certainly out there.

Since our 457(b) plans are so restrictive, could you give advice on the best way to utilize these plans? 

See: We have $3.9 million in retirement and cash, but face a $60,000 annual college bill for our child over 5 years. Can I retire if my wife keeps working?