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5 months left, should I stop contributing?
Old 07-03-2013, 09:27 AM   #1
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5 months left, should I stop contributing?

My 457 (for government workers) has been in a yo-yo for the last 3 months and I feel like I'm throwing my contribution away. Im basically in the same place today that i was 3 months ago and all my input Was useless. I'm 5 months out from cashing out but wanted to be farther along than where I am now. Should I stop my contribution (tax free) and just bank it or take the risk for the next 5 months?

I'm cashing out to buy a house, btw, get some major dental work and to pay off some bills. Will have a pension, paid med, and savings, simple lifestyle.

Any thoughts are appreciated. Thanks
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Old 07-03-2013, 09:59 AM   #2
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sounds reasonable to me
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Old 07-03-2013, 10:00 AM   #3
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Originally Posted by linny727 View Post
My 457 (for government workers) has been in a yo-yo for the last 3 months and I feel like I'm throwing my contribution away. Im basically in the same place today that i was 3 months ago and all my input Was useless. I'm 5 months out from cashing out but wanted to be farther along than where I am now. Should I stop my contribution (tax free) and just bank it or take the risk for the next 5 months?

I'm cashing out to buy a house, btw, get some major dental work and to pay off some bills. Will have a pension, paid med, and savings, simple lifestyle.

Any thoughts are appreciated. Thanks
Your primary mistake is not so much in continuing to contribute to your 457, but rather in placing money that you will need in five months into volatile investments, presumably stock mutual funds. It's investing 101 that money you will need in the near future should be placed in low risk accounts. So all of the money in your 457 belongs in a stable value fund, fdic insured investment option, or money market fund, whichever is the best yielding option that your 457 offers.

I also question why you think it's an advantage to put the money into your 457 if you are going to cash out before the end of the year. I could see how it might make sense to defer taxes this year in order to make withdrawals next year, when you might be in a lower tax bracket. But five months from now is still in 2013, so I'm just not seeing the advantage of the tax deferal.
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Old 07-03-2013, 11:17 AM   #4
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Your primary mistake is not so much in continuing to contribute to your 457, but rather in placing money that you will need in five months into volatile investments, presumably stock mutual funds. It's investing 101 that money you will need in the near future should be placed in low risk accounts. So all of the money in your 457 belongs in a stable value fund, fdic insured investment option, or money market fund, whichever is the best yielding option that your 457 offers.

I also question why you think it's an advantage to put the money into your 457 if you are going to cash out before the end of the year. I could see how it might make sense to defer taxes this year in order to make withdrawals next year, when you might be in a lower tax bracket. But five months from now is still in 2013, so I'm just not seeing the advantage of the tax deferal.
+1 to all of that.

Putting it in now and then taking it out again this year gains you nothing. Taking it out next year might be OK if your income tax rate will be less next year.

It would probably be better to save the 457 and use savings (taxable I assume) to pay your current expenses.
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Old 07-03-2013, 02:40 PM   #5
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Sorry - I'm taking the money out in 2014. My taxes will be much less in 2014 and I already figured the tax for the 457. There is no penalty with a 457.

Thanks for your advice!
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Old 07-03-2013, 03:31 PM   #6
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Why not put some funds in Roth IRA instead?
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Old 07-03-2013, 03:50 PM   #7
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But can I then cash it out in 6 months?
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Old 07-06-2013, 11:17 AM   #8
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Thanks for all your advice. I moved everything into retirement "safe" funds. I feel a lot better!
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