Really small retirement account-what to do with it?

[Hedy]

In the course of post-college employment, I worked for three weeks as a special ed substitute teacher. As a result, I have a "governmental" 457 plan with around $50 in it. I know I could just keep it in there, but I'm worried about losing track of it should their recordkeeper change. My current 401K won't let me roll in into it as the 457 is a governmental plan. Is there any place that opens up a laughably small IRA? Should I (gasp, horror) just cash it out, deal with the $5 (or so) penalty and then just pop it in my Roth? Should I just leave it be?

[disneysteve]

That is kind of a pain. If you don't have an IRA you can roll it into, I think this might be a time when the penalty of cashing out would be outweighed by the hassle of keeping it. It just complicates record keeping. I don't know how old you are, but let's say you are 35. That $50 will grow to a whopping $546 by age 65, hardly enough to have much impact on your retirement. Cash it out and use the proceeds toward your 2007 Roth contribution.

[Hedy]

That is kind of a pain. If you don't have an IRA you can roll it into, I think this might be a time when the penalty of cashing out would be outweighed by the hassle of keeping it. It just complicates record keeping. I don't know how old you are, but let's say you are 35. That $50 will grow to a whopping $546 by age 65, hardly enough to have much impact on your retirement. Cash it out and use the proceeds toward your 2007 Roth contribution.

I'm 23, so that definitely makes sense. I just wanted to make sure I wasn't missing a chance to roll it over somehow.

[JBinKC]

I agree with the consensus of the board unless you have a regular IRA account already established I would probably cash it in. Even IRAs have minimum account requirements at banks.

If you have a Roth IRA established move it there pay the tax on the income and you avoid the 10% penalty.

[Hedy]

I agree with the consensus of the board unless you have a regular IRA account already established I would probably cash it in. Even IRAs have minimum account requirements at banks.

If you have a Roth IRA established move it there pay the tax on the income and you avoid the 10% penalty.

So I could roll it over into my Roth? I thought I'd need to convert it somehow.

[JBinKC]

If you pay the taxes on the income you can convert it

[Hedy]

If you pay the taxes on the income you can convert it

I'd thought it had to go something like this (at least this year):
457->Normal IRA->Roth IRA., the problem being that it's pointless to create an $50 normal IRA. Is that the case, or can I just be like "I am converting this to a Roth, I will pay taxes" and poof! It can be rolled over into my Roth?

[kv968]

I'd thought it had to go something like this (at least this year):
457->Normal IRA->Roth IRA., the problem being that it's pointless to create an $50 normal IRA. Is that the case, or can I just be like "I am converting this to a Roth, I will pay taxes" and poof! It can be rolled over into my Roth?

Cash it out and put it towards a Roth IRA. It won't even be worth the paperwork to roll it over.

[JBinKC]

Are you going to contribute the max to your Roth IRA?

If so : Contribute the max to a regular IRA and do a manual 60 day rollover to the regular IRA then convert it to a Roth. Before you do that find out if any fees are attached to it. If they are involved you are better off just cashing it and contributing to the Roth.


Taxes: Take the regular IRA deduction and then add your conversion amount to your income.

Hope that helps.