457b - - traditional or roth

[Recliner]

I'm married and my wife doesn't work now (she might start again when the kids are all in school but want to plan as if she never works again) I'm 36 and she's 34.

I've got a government job and make ~$110,000. I love my position and don't plan on advancing any further so my salary will basically stay the same. Raises will keep up with inflation or slightly beat it.

My 457b has a 50% match up to the federal max of $18k, so I contribute $18k each year and they contribute another $9k. My wife and I also max our Roth IRA and HSA every year.
My pension when I retire will be $45k/year (also keeps up with inflation) and I will also get whatever social security is paying out at the time.
Im 20 years away from retirement and currently we have ~$625,000 invested
$110k conventional 457
$25k Roth deferral 457
 $125k Roth IRA
 $105k rollover IRA
$20k decedent IRA
$240k taxable accounts
Is there a clear winner for how I should be contributing to my 457 (Roth or not)?
With my pension and social security it seems like I'd be staying in the same tax bracket in retirement so I'm not sure if it really makes a difference

[MDM]

With my pension and social security it seems like I'd be staying in the same tax bracket in retirement so I'm not sure if it really makes a difference

If you will in fact be in the same tax bracket, because you are contributing the maximum amount, Roth will be better.  See Traditional versus Roth - Bogleheads.

But if you can time things so SS and/or your pension can be delayed, then you will have some years in which your tax bracket could be lower than current and using traditional now could be better.  Delaying SS definitely gives you higher annual payments when you do start - do you have a similar choice with your pension?

[seattlecyclone]

Are you planning to make early withdrawals from the 457? The nice thing about these plans compared to a 401(k) or 403(b) is that there's no 10% early withdrawal tax added to your non-qualified withdrawals. However you should be aware that if you choose the Roth 457 option you will still owe your regular tax rate on early withdrawals of earnings.

[Recliner]

With my pension and social security it seems like I'd be staying in the same tax bracket in retirement so I'm not sure if it really makes a difference

If you will in fact be in the same tax bracket, because you are contributing the maximum amount, Roth will be better.  See Traditional versus Roth - Bogleheads.

But if you can time things so SS and/or your pension can be delayed, then you will have some years in which your tax bracket could be lower than current and using traditional now could be better.  Delaying SS definitely gives you higher annual payments when you do start - do you have a similar choice with your pension?

My pension starts paying as soon as I retire as long as I'm at least 52. I'm currently planning on retiring at 56. My pension amount goes up about $1,400/year so I'd get $5,600 less per year if I retire at 52 vs 56.

[Recliner]

Are you planning to make early withdrawals from the 457? The nice thing about these plans compared to a 401(k) or 403(b) is that there's no 10% early withdrawal tax added to your non-qualified withdrawals. However you should be aware that if you choose the Roth 457 option you will still owe your regular tax rate on early withdrawals of earnings.

I'll probably withdraw from the 457 the difference between my pension and the max of the 15% tax bracket at least until I start receiving social security

[MDM]

If you have 2 kids, part of your $18K 457 would probably save you 25% federal tax.  That part should go to the traditional 457.  If you have 3 or more kids, you are probably down into the 15% marginal rate before any contributions, so all Roth seems better.

See the chart near cell I72 in the case study spreadsheet if you enter your family situation and income.

[cacaoheart]

My 457b has a 50% match up to the federal max of $18k, so I contribute $18k each year and they contribute another $9k.

How long have you been contributing $18k and having it matched with $9k annually in your 457b? I'd love to be wrong, but it's my understanding that with 457b's, unlike with a 403b/401k, $18k is the max for you and your employer to put in together (until you're over 50), meaning that if they match you 50% you would only put in $12k and they would put in $6k, whereas with a 401k/403b an employer can put in up to $53k yearly (or $53k minus the employee's $18k contribution).

One thing I'd look into is whether or not your job also has a 403b/401k option. At one state hospital I've considered working at, employees can have a 457b, a 403b, and either the state pension plan or the ORP (optional retirement plan), enabling someone to tax defer more than $50K per year.

This link does a fair job of discussing employer contribution limits:
https://www.ncompliance.com/employercontributions.aspx

[MDM]

...it's my understanding that with 457b's, unlike with a 403b/401k, $18k is the max for you and your employer to put in together (until you're over 50), meaning that if they match you 50% you would only put in $12k and they would put in $6k, whereas with a 401k/403b an employer can put in up to $53k yearly (or $53k minus the employee's $18k contribution).

IRS Dollar Limitations on Benefits and Contributions agrees with you.