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457 Fees vs. Taxable Account
Old 12-02-2021, 03:26 PM   #1
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457 Fees vs. Taxable Account

I am currently 50 years old and will be retiring at age 55 with my current job/career of 30 years. I will be receiving a pension as well.

I currently max out my Roth IRS and 403B Roth and I will be encountering additional income next year that will allow me to invest more.

My question is, Which will be better to invest in: a Govt 457 or Taxable Acct?This would occur after maxing out my Roth IRA and 403B Roth.

What concerns me is the Fees for the 457 through the 3rd party Vendor( TCG Services).
See below for the 457 Govt:

Administration Fees: $22.00 per participant per year, 0.25% of assets, paid by the participants (capped at $150,000 in assets)
Advisor Fees:0.10% of assets, paid by participant
Consultant Fees: 0.42% of assets, paid by participant
Plan Coordinator Fees: $0.15 per participant per month, paid by participant
Custodian Fees: 0.10%, paid by participant
Other Fees:$30 Distribution Fee, $50 Loan Set Up, All of the above paid by participant


*Pre-Tax

My 403B is pretty good which allows me to Invest in Vanguard and the only fees is from Vanguard which charges a straight annual $60 403b fee and then the expense ratio. Any remaining 3rd party fees is paid by my employer.

I would have 4 years left before retiring when I encounter the extra $, so would the 457 be ok to utilize during the last year or two before I retire so I rack up less fees and then upon retirement roll it over into my IRA? Or just avoid it all together and stick with a Taxable Acct?

One more thing to add: Despite early retirement at 55, I will be working overseas for another 5 years. So I don't plan to tap into my retirement until at least 60 years of age.
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Old 12-02-2021, 10:31 PM   #2
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So ignoring the couple flat fees, it looks like 1.02% (up to $150k, then 0.77% above that) on top of any fund fees.

That seems exorbitant. In DW's 401k, TIAA takes $10/quarter total for each account regardless of size.

Is employer providing any match of contributions to the 457? If not, for me, personally, unless you can find a reason for administrator to collect $1500 on first $150,000 you have there, I wouldn't contribute to it. What are they doing for you?


Without any additional compelling info, I would go for the taxable account.
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Old 12-08-2021, 03:26 PM   #3
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UPDATE: 12/8

I spoke with the company that runs the 457 traditional plan (TCG Services) and spoke to an Advisor.

There are 3 separate fees that comes standard which totals 0.87% a year. They spread it over 12 months so it comes to a fee charge of .0725% a month. There is also a $1.98 monthly fee per participant.

The fees seem quite high??

Would it be worth it if I invested in the 457 for only 5 years or even less? Maybe 1-3 years? I am concerned that if I am able to invest the max each year and with a positive stock market, I'll be paying over $870 in fees once I hit 100k. :shock:

Of course, once I am able to retire, I can roll over the 457 and protect it into a Roth and avoid future fees!

I also intend to not withdraw that money for another 10 years or more after the rollover to the IRA. Would investing and paying taxes/ capital gains in a Taxable acct cost more over that time?

So, thoughts if I should do a Taxable or 457?
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457 Fees vs. Taxable Account
Old 12-08-2021, 05:15 PM   #4
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457 Fees vs. Taxable Account

Quote:
Originally Posted by Stillwater007 View Post
UPDATE: 12/8



I spoke with the company that runs the 457 traditional plan (TCG Services) and spoke to an Advisor.



There are 3 separate fees that comes standard which totals 0.87% a year. They spread it over 12 months so it comes to a fee charge of .0725% a month. There is also a $1.98 monthly fee per participant.



The fees seem quite high??



Would it be worth it if I invested in the 457 for only 5 years or even less? Maybe 1-3 years? I am concerned that if I am able to invest the max each year and with a positive stock market, I'll be paying over $870 in fees once I hit 100k. :shock:



Of course, once I am able to retire, I can roll over the 457 and protect it into a Roth and avoid future fees!



I also intend to not withdraw that money for another 10 years or more after the rollover to the IRA. Would investing and paying taxes/ capital gains in a Taxable acct cost more over that time?



So, thoughts if I should do a Taxable or 457?


The advantage the 457 gives is that you can reduce taxable income and effectively contribute ďextraĒ IRA money. You will avoid Federal and state tax on your contributions. Because of that you cannot directly roll into a Roth without paying taxes ( but can roll tax free into a regular IRA). It could be very beneficial but it depends on your current marginal tax rate, whether you plan to move to a lower tax state and whether you already have too much tax deferred money. Hard to answer from your post.
I will add that I used 457 contributions in my last two years of work, knowing that I planned to move to a zero tax state after retirement. An automatic substantial saving regardless of federal tax arbitrage.
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Old 12-08-2021, 05:25 PM   #5
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I keep my 457 active (and Iím retired) because itís my only access to a stable value fund.
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