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457b or brokerage?
Old 10-24-2018, 09:41 PM   #1
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457b or brokerage?

Hi everyone. My wife maxes her 401k. I max my 403b. I have the option to also open a 457b, but I’m not sure if I want to contribute to that or just a brokerage account. We are 36 and plan to “retire” at 50. I need to fund age 50-60.
Here’s my question:
When I reach age 50, I can either 72t from my 403b and 457b (and pay taxes at standard bracket rates), or I can sell assets within a brokerage account and only pay capital gains tax. Seems to me that the brokerage is the better option since income taxes would be lower on the withdrawals.
Should I contribute extra $$ to another retirement account (457) or to a brokerage account to fund age 50-60?
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Old 10-25-2018, 11:03 AM   #2
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Do you know what the rules are for the 457? Once you separate from your employer are you allowed to tap it penalty free? Will you collect a pension starting at 60? If not why do you only need to fund 50 to 60?
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Old 10-25-2018, 11:08 AM   #3
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I would add that there are very few professions that allow you to fund 2 separate retirement accounts fully, you should take advantage of it especially since the recent new tax plan considered nixing this benefit. Are you an officer?
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Old 10-25-2018, 11:55 AM   #4
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Great questions. I work in a school district. I can contribute $18.5k into my 403b (I already do) AND $18.5k into a 457.
I will have a pension starting at age 60. I also will be able to access my retirement accounts at 59.5 years old. I’m trying to figure out best vehicle to use to provide funds for age 50-60. 457 allows early withdrawals without penalty, but the withdrawals are taxed at income bracket rates. Brokerage can be withdrawn anytime and taxes at just capital gains rate.
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457b or brokerage?
Old 10-25-2018, 12:11 PM   #5
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457b or brokerage?

I had a similar opportunity and did fund both a 457 and 403b. In my case it was a very favorable tax situation to do this. I avoided federal and state taxes on contributing to the 457. When I retired I rolled the 457 to an ira. My state doesn’t tax IRA withdrawals so I permanently avoided state taxes on that money
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Old 10-25-2018, 01:03 PM   #6
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When you separate from service you can access your 457b penalty free regardless of age. Because of this I would max out the 457b 1st then the 403b.

(If you roll into an IRA you lose the ability to access the money penalty free. Unless of course you do a 72t.)
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Old 10-25-2018, 01:09 PM   #7
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School districts usually have very expensive and mediocre options in both plans. There may be an annuity wrapper in the 403 (b). I would look at all the investment choices in both plans as part of my analysis.
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Old 10-25-2018, 02:45 PM   #8
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My 403b is Vanguard. Very low fees. I need to convince my HR department to research additional 457 providers.
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Old 10-25-2018, 05:11 PM   #9
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Quote:
Originally Posted by frugalthirty View Post
My 403b is Vanguard. Very low fees. I need to convince my HR department to research additional 457 providers.
Yeah. Fees and investment options are very important to choosing any strategy involving an employer-provided savings option.
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Old 10-25-2018, 07:49 PM   #10
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Quote:
Originally Posted by Morgan22 View Post
When you separate from service you can access your 457b penalty free regardless of age. Because of this I would max out the 457b 1st then the 403b.

(If you roll into an IRA you lose the ability to access the money penalty free. Unless of course you do a 72t.)

This would be my logic as well. But also be aware of the investment options and fees, it may make the 457 less attractive.
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