Noob Question! - Pension and 457 Plan -

[Holmes]

Hi guys,

I just discovered the website and philosophy. I greatly appreciate this community and find it a comfort to know there is a tried and tested avenue for freedom!

Anyway my question concerns how to calculate early retirement when one (that's me) has a pension as well as a 457 plan. I am a 30 year old new teacher so I won't have access to the pension for quite some time but I would like to retire well before then.

I just started putting money in a Valic 457 plan and would like to use that as a vehicle for collecting revenue. Does the forum think this is a doable idea? Can I receive dividend checks from a 457? Also, how would you calculate an early pension payout along with a 457?

I'm sorry if these questions are too noob. Cut me some slack! I'm new at this! :)

-Holmes

[arebelspy]

First look into the details of your pension plan - minimum number of years needed, what age you can retire at (likely depends on years served), if you can purchase years, if they have lump sum payout or not, taking pension early possibilities and penalties, etc.

Then we can more fully answer your questions.

For the 457, the great thing is it's like a 401k, but with no 10% penalty before age 59 1/2 - when you sever employment you can withdraw it all (paying normal taxes at that time, of course, since it's a tax deferred account).

FIRECalc - firecalc.org - is a great tool for estimating retirement planning with future income streams (such as a pension) able to be added.

[Holmes]

Thanks! I will look into the details of the pension plan.

Since my 457 is only able to go through Valic, my options for investments are limited. Currently I have my small nest egg in the Vanguard Wellington fund. Would it be advisable to roll the 457 into a Roth IRA and invest that money into the Vnaguard index fund or do the advantages of the 457 outweigh the option?

I appreciate the feedback!
Holmes

[arebelspy]

Without knowing the details of your situation, I probably would leave the 457 where it is rather than roll it over and pay taxes now.  The question is more going forward: should you invest in the Roth or 457?

That too will depend on the details of your situation (tax rate now, expected future tax rate, etc.)

Thanks to it being a 457 and accessible without the 10% penalty when you retire, it's not too harmful to have it there.  Additionally with the Roth you'll be able to access the principal contributions without the penalty, and only gains after 59 and 1/2.

Hopefully, being Mustachian, you are saving more than 5k/yr., so probably the most prudent move is split contributions between the Roth and 457.

I don't know anything about Valic, what fees they charge, or anything like that, you should look into that as well.