|
Should I invest in 457(b) def comp?
01-17-2018, 08:44 PM
|
#1
|
Recycles dryer sheets
Join Date: Sep 2014
Posts: 50
|
Should I invest in 457(b) def comp?
My government give has a 403(b) plan where 7% of my pay is automatically invested in the plan. After 8 years (6.5 to go), my employer matches the account by 200%.
My gig also offers a 457b def comp plan, but I do not participate. There is no match.
Any suggestions on how to decide whether/how much I should invest in def comp? If I contribute the max 18k, I will have to withdraw that amount from my brokerage account and pay capital gains taxes to cover expenses. We use almost all of my take home. I haven't participated to date because my understanding is the expenses are high (1.5%) on the underlying investments in the plan.
Thanks in advance for your thoughts.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
01-18-2018, 02:35 AM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Jun 2016
Posts: 4,655
|
Quote:
Originally Posted by Legally_dead
My government give has a 403(b) plan where 7% of my pay is automatically invested in the plan. After 8 years (6.5 to go), my employer matches the account by 200%.
My gig also offers a 457b def comp plan, but I do not participate. There is no match.
Any suggestions on how to decide whether/how much I should invest in def comp? If I contribute the max 18k, I will have to withdraw that amount from my brokerage account and pay capital gains taxes to cover expenses. We use almost all of my take home. I haven't participated to date because my understanding is the expenses are high (1.5%) on the underlying investments in the plan.
Thanks in advance for your thoughts.
|
I did contribute the max to my 457b, but was able to do so using my compensation rather than my taxable portfolio. The advantage in my case is that the 457b grew tax-deferred but upon leaving the company, funds can be withdrawn either as a lump sum or as periodic payments. I haven’t started drawing on it yet, but think it will be a helpful bridge between ER at age 56 and taking SS or tIRA distributions. My 457b didn’t have a match either. Your 403b sounds like a great deal.
|
|
|
01-18-2018, 04:05 AM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
|
Legally_dead, is the 403b in lieu of social security?
|
|
|
Should I invest in 457(b) def comp?
01-18-2018, 10:29 AM
|
#4
|
Recycles dryer sheets
Join Date: Sep 2014
Posts: 50
|
Should I invest in 457(b) def comp?
Gayl--No, I believe I still get SS as my employer withholds FICA taxes. Another detail I left out about the 403b is that it has a guaranteed 7% interest on contributions.
|
|
|
01-18-2018, 12:12 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
|
In that case, I personally wouldn't put into 457 especially since 403b has same deferred limit (building up to that 18k w/ half of all raises. ... marathon not sprint). But many disagree with me so take a poll
And, yeah, from what I know, if paying into SS then not under WEP / WPO / GPO
|
|
|
01-18-2018, 01:33 PM
|
#6
|
Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,290
|
Quote:
Originally Posted by Legally_dead
After 8 years (6.5 to go), my employer matches the account by 200%.
|
(Bolding mine.)
Two hundred percent match after 8 years? If that's not a typo I'd be dumping every nickel I could find in there!
__________________
When I was a kid I wanted to be older. This is not what I expected.
|
|
|
01-18-2018, 02:32 PM
|
#7
|
Recycles dryer sheets
Join Date: Sep 2014
Posts: 50
|
Walt34--Not a typo, but it has to be 7% of pay. I can't contribute less and I can't contribute more. I would love to be able to do more.
|
|
|
01-19-2018, 05:54 AM
|
#8
|
Thinks s/he gets paid by the post
Join Date: Feb 2007
Location: Upstate
Posts: 2,944
|
Quote:
Originally Posted by Legally_dead
Walt34--Not a typo, but it has to be 7% of pay. I can't contribute less and I can't contribute more. I would love to be able to do more.
|
Are you sure on the details of this? That is, is the 200% match ONLY if you have EXACTLY 7% taken out, or is the 200% match only on the FIRST 7% taken out?
|
|
|
01-19-2018, 06:20 AM
|
#9
|
Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
|
Quote:
Originally Posted by Legally_dead
Walt34--Not a typo, but it has to be 7% of pay. I can't contribute less and I can't contribute more. I would love to be able to do more.
|
ok. I take it back. If you can only contribute 7% to get the 200% match, then do 7% to 403b and 1/2 of all raises to the 457 and 1/2 to lifestyle creep until you hit 18k IMHO
|
|
|
01-19-2018, 07:08 AM
|
#10
|
Recycles dryer sheets
Join Date: May 2015
Posts: 67
|
Remember that the 18k limit isn’t split between a 403 and a 457, it’s 18k in EACH for a total of 36k a year in tax deferred accounts. If you have the money, max out both.
|
|
|
01-19-2018, 08:38 AM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
|
Quote:
Originally Posted by orangehairfella
Remember that the 18k limit isn’t split between a 403 and a 457, it’s 18k in EACH for a total of 36k a year in tax deferred accounts. If you have the money, max out both.
|
Max the 403b first and then contribute to the 457. The 457 has the advantage that you can access it without penalty after you leave your job....you don't have to wait until 59.5. I would double check on the fees you mentioned.
FYI a 403b cannot be used as a replacement for SS. If a state opts out of SS they must offer a state pension and that is generally organized under 401a.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”
Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
|
|
|
01-19-2018, 08:58 AM
|
#12
|
Recycles dryer sheets
Join Date: Nov 2014
Posts: 198
|
Quote:
Originally Posted by nun
Max the 403b first and then contribute to the 457. The 457 has the advantage that you can access it without penalty after you leave your job....you don't have to wait until 59.5. I would double check on the fees you mentioned.
|
+1 sort of
I would max out the 403b, then max out the 457b to the extent the money is in the 22% or higher marginal Federal tax bracket. If the contribution money is 12% marginal tax money, then I would max out the 403b, then max a Roth IRA, then probably invest after-tax.
I used my 457b balances to fund my first years of retirement. There are other ways to avoid the 10% penalty of 403b/401ks, but the 457b is even easier.
__________________
ER'd 6/5/2015 at age 58. DW retired 6/18/2021 with small pension and SS. Planned WR before my SS (2024-2026) is 4-5%, then we will start my SS and a lower WR at age 70 (2027)
|
|
|
01-19-2018, 09:03 AM
|
#13
|
Recycles dryer sheets
Join Date: Jun 2013
Location: Chattanooga
Posts: 497
|
I also used a 457b to help my progress to retirement. In my case I was in the 15% marginal bracket and the deferral didn't help with Federal taxes, BUT I could roll the 457 into an IRA; in my state retirees do not pay state taxes on IRA withdrawals.
That was after maxing out my 403b, Roth and HSA contributions...
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|