Afraid of 457b. Thoughts? Advice?

[SavinMaven]

In a prior job, I lost my 457b as I had to leave before it vested. That was ok, I guess, since at that point it was all employer contributions, but it still stung, since its existence had figured in to salary negotiations.

Now, I've had access to an entirely employee-funded 457b, but haven't put a penny in, for seven years. Of course I'd like tax-advantaged space, but having it locked away until separation from the employer bothers me. The absolute deal-killer has been reading that the money is still owned by the employer, even if it's employee contributions - hence, the "deferred" part.

Anyone with good or bad experiences with 457b accounts to share?

[MDM]

Is this a governmental (including school systems) or non-governmental 457b?

See 457(b) - Bogleheads.

[cool7hand]

My wife's school district offers an employee-funded 457b. We max it out first because she can use it as soon as she leaves the district. Ask for the Summary Plan Description and look at the rules, but an employee funded 457b is a great resource.

[honeybbq]

Many 401s or 457s with restrictions on vesting. Usually you are 100% vested in your own contributions and have a timing to vest with employer contributions.

7 years you have been missing out on this.... what is the vesting period?

[Sibley]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

[SavinMaven]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

Yes, I'm sure.

https://www.money-zine.com/financial-planning/retirement/457f-plans/

Under "asset ownership".

It's a key stumbling block for me. I don't *think* my employer will go under, but doesn't everyone think that?

[MDM]

There is a difference between 457(b) and 457(f).

See 26 U.S. Code § 457 - Deferred compensation plans of State and local governments and tax-exempt organizations for nitty-gritty details, but don't assume that a 457(f) condition applies to a 457(b) plan.

[Sibley]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

Yes, I'm sure.

https://www.money-zine.com/financial-planning/retirement/457f-plans/

Under "asset ownership".

It's a key stumbling block for me. I don't *think* my employer will go under, but doesn't everyone think that?

You linked to 457f plans. Do you have a 457b or a 457f plan available?

[BudgetSlasher]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

Yes, I'm sure.

https://www.money-zine.com/financial-planning/retirement/457f-plans/

Under "asset ownership".

It's a key stumbling block for me. I don't *think* my employer will go under, but doesn't everyone think that?

Just echoing what others have already said 457(f) is not 457(b).

[Sibley]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

Yes, I'm sure.

https://www.money-zine.com/financial-planning/retirement/457f-plans/

Under "asset ownership".

It's a key stumbling block for me. I don't *think* my employer will go under, but doesn't everyone think that?

Just echoing what others have already said 457(f) is not 457(b).

M guess is OP has realized that they were wrong, missed out on 7 years of contributions, and are now too embarrassed to type it.

[Mrs. Healthywealth]

For a 457b you can take out money, without penalty, at any age after you leave the company. Majority of our stache is in the 457b, it’s a great option. 7yrs no contribution to it Doesn’t mean you can’t start now. The bogleheads do a great job of explaining what how a 457b is useful. Using a 457b means if you retire early you can start using the money right away if you choose.

[RWTL]

I'm not, but I work for a governmental agency so I'm not too concerned about default.  I'm hoping this will be another tool to use in the early days of early retirement.

[Chris @ Saturday Financial]

Are you 100% positive about the money ownership? Because that doesn't make sense, and based on my quick googling I don't see anything like that.

Yes, I'm sure.

https://www.money-zine.com/financial-planning/retirement/457f-plans/

Under "asset ownership".

It's a key stumbling block for me. I don't *think* my employer will go under, but doesn't everyone think that?

Just echoing what others have already said 457(f) is not 457(b).

M guess is OP has realized that they were wrong, missed out on 7 years of contributions, and are now too embarrassed to type it.

The OP linked to info about 457(f)s instead of 457(b)s, but that doesn't necessarily mean they are wrong about the fact their employer would own the assets in their 457(b).

If the 457(b) in question is a non-governmental 457(b), the plan assets are the property of the sponsoring employer. From the IRS:

"Non-governmental 457(b) (“Top Hat”) plans must limit participation to groups of highly compensated employees or groups of executives, managers, directors or officers. The plan may not cover rank-and-file employees. . .

. . .Non-governmental 457 plans must remain unfunded. Plan assets are not held in trust for employees, but remain the property of the employer (available to its general creditors in the event of litigation or bankruptcy). Non-governmental 457(b) plans commonly use “rabbi trusts” to hold employee deferrals. The rabbi trust is funded, but the trust assets remain available to creditors. Employees are lower in priority than general creditors in the event of legal claims against the employer."

https://www.irs.gov/retirement-plans/non-governmental-457b-deferred-compensation-plans

[SavinMaven]

Thanks for your thoughts everyone.

I definitely have a 457b. Sorry about the link to the f version - posted quickly.

It's become moot as Mr SavinMaven is 100% opposed to using the 457b. The fact that the account remains employer property while you work for them makes it a non-starter for him. With any luck, I'll work for my present company another 20 years. Maybe as the time horizon gets shorter it'll be less of a concern.

Thanks again!

[kite]

Thanks for your thoughts everyone.

I definitely have a 457b. Sorry about the link to the f version - posted quickly.

It's become moot as Mr SavinMaven is 100% opposed to using the 457b. The fact that the account remains employer property while you work for them makes it a non-starter for him. With any luck, I'll work for my present company another 20 years. Maybe as the time horizon gets shorter it'll be less of a concern.

Thanks again!

My spouse has a different risk tolerance than I do, and he was similarly opposed to putting retirement savings into anything that was ‘locked up where it couldn’t be touched’ and his savings went into jars, cans & ultimately into CD’s.  My business is risk and my appetite for risk is much higher, so mine went into a 457 when I was in government (10 years), into 401k accounts when I moved to private industry (two companies, each about 10 years) and also into other esoteric instruments in my IRA and RothIRA.  I was thrilled to get an HSA in the mix and while that’s a ‘family’ account, I still pick the mutual funds.  As I’ve left jobs, the 457 & 401k balances have been rolled into IRAs.
Decades into marriage, there is a stark difference in our respective balances.  As we are a unit, I consider ‘his’ portion that is essentially a cash-equivalent to be the proportion that ought to be in cash for someone our age.  And ‘my’ portions that are in equities, real-estate, art & bonds to be the right proportion for someone our age to have in those higher risk investment instruments.  After thirty-plus years of marriage, it’s all ‘ours’ no matter how it’s sliced and we each retain control over our respective contributions. When I rebalance every year, I look at the total picture. 

You get to do you and your marriage & savings as best works for you. Without knowing the rest of your financial picture, I can’t say that opting out of the 457 is a gigantic mistake (I suspect it is, but I don’t know.). It really depends on the rest of your financial picture and what other options you have.  I’m the kind of person who can’t let my partner decree that how I’m investing my retirement savings is a ‘non-starter’ but if it works for your family, mazel tov!

[billy]

For a 457b you can take out money, without penalty, at any age after you leave the company. Majority of our stache is in the 457b, it’s a great option. 7yrs no contribution to it Doesn’t mean you can’t start now. The bogleheads do a great job of explaining what how a 457b is useful. Using a 457b means if you retire early you can start using the money right away if you choose.

With my pre-tax and roth 457(b), working for the state, I was told if I retire before 50 y.o. then I have to wait to 59.5y.o. to withdraw penalty free. Is this a IRS rule or bargaining unit rule, do you happen to have links?

[Chris @ Saturday Financial]

Thanks for your thoughts everyone.

I definitely have a 457b. Sorry about the link to the f version - posted quickly.

It's become moot as Mr SavinMaven is 100% opposed to using the 457b. The fact that the account remains employer property while you work for them makes it a non-starter for him. With any luck, I'll work for my present company another 20 years. Maybe as the time horizon gets shorter it'll be less of a concern.

Thanks again!

My spouse has a different risk tolerance than I do, and he was similarly opposed to putting retirement savings into anything that was ‘locked up where it couldn’t be touched’ and his savings went into jars, cans & ultimately into CD’s.  My business is risk and my appetite for risk is much higher, so mine went into a 457 when I was in government (10 years), into 401k accounts when I moved to private industry (two companies, each about 10 years) and also into other esoteric instruments in my IRA and RothIRA.  I was thrilled to get an HSA in the mix and while that’s a ‘family’ account, I still pick the mutual funds.  As I’ve left jobs, the 457 & 401k balances have been rolled into IRAs.
Decades into marriage, there is a stark difference in our respective balances.  As we are a unit, I consider ‘his’ portion that is essentially a cash-equivalent to be the proportion that ought to be in cash for someone our age.  And ‘my’ portions that are in equities, real-estate, art & bonds to be the right proportion for someone our age to have in those higher risk investment instruments.  After thirty-plus years of marriage, it’s all ‘ours’ no matter how it’s sliced and we each retain control over our respective contributions. When I rebalance every year, I look at the total picture. 

You get to do you and your marriage & savings as best works for you. Without knowing the rest of your financial picture, I can’t say that opting out of the 457 is a gigantic mistake (I suspect it is, but I don’t know.). It really depends on the rest of your financial picture and what other options you have.  I’m the kind of person who can’t let my partner decree that how I’m investing my retirement savings is a ‘non-starter’ but if it works for your family, mazel tov!

There is a massive difference between a governmental 457(b) and a non-governmental 457(b). SavinMaven's 457(b) contributions would become the property of her employer for the duration of her employment. And if her organization goes bankrupt during that timeframe, she will be lower in priority than general creditors.

In short, non-governmental 457(b) plans are an entirely different kind of vehicle than 401(k), 403(b), and governmental 457(b) plans.

I think SavinMaven has made a very sound decision given her situation. The likelihood of any organization going bankrupt during a 20 year time horizon is far from zero. SavinMaven is correct: "as the time horizon gets shorter it'll be less of a concern."