Author Topic: 401A, 403B, 457, VTSAX after-tax, regular savings priority  (Read 1097 times)

fixie

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401A, 403B, 457, VTSAX after-tax, regular savings priority
« on: December 17, 2018, 02:54:25 PM »
Hello mustachioed ones,
I have been maxing the aforementioned accounts for a while, but next year am considering decreasing the pre-tax amounts(either 403b or 457 or some of both) in order to build up more liquid assets for a while(perhaps a year or 2).  This is in order to make/fund some life changes where I sell my home and purchase a farm property.  I'd keep my job, rent out the farm house, bring in some revenue from the farm like hay, maker space rental, renting the land itself for livestock, that sort of thing. 
Some info:
403b has the most in it by far
401A I cannot change the amount I contribute(5% pretax)
457 has 10x less than 403b
VTSAX after-tax I fund with money left over at the end of the month, if any
VMFXX is where I keep liquid assets for remodels, plus emergency fund.
Crappy savings/checking account just for payroll and money flows.
403B and 457 are invested very similarly in index funds.  My question is, as I am limited in total income to allocate toward retirement and savings, should I prioritize the larger account(403b), or the account that becomes available without penalty once I leave my job in 2-5 years?  I'd like to have liquid assets available to make investments into the land while I continue working for a while longer.  It seems to make more sense to jam as much as possible into the 403b, since it will grow at a greater rate(performance being equal).   Obviously I get hit on the tax side, but my taxes are pretty low, since I am jamming so much into pretax right now(~55% of my total income). 

Thoughts? 
-fixie


terran

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Re: 401A, 403B, 457, VTSAX after-tax, regular savings priority
« Reply #1 on: December 17, 2018, 03:30:17 PM »
All other things being equal I would always contribute to a governmental 457 instead of a 403(b) because of the early withdrawal. So the question is, are all other things equal? Are the investments the same including expense ratio, or is one worse than the other?

A larger account does not grow at a faster rate than a smaller account (the absolute number will be bigger, but the rate will be the same -- that's not how compounding works). For example, if your 403(b) is $400k, your 457 is $40k, next years rate of return is 10% and you're going to contribute the full $19k into one or the other at the beginning of the year to make the math easy, then you'll either have $419k x 1.1 + $40k x 1.1 = $504,900 or $400k x 1.1 + $59k x 1.1 = $504,900.

fixie

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Re: 401A, 403B, 457, VTSAX after-tax, regular savings priority
« Reply #2 on: December 17, 2018, 03:58:24 PM »
Thank you, you're right of course.  I was imprecise in my language regarding rate.  The expense ratios are very close and they do have similar performance, this year at least(only been in the 457 1.5 years).  I DO like the easy access option of the 457.  This is the time of year I look at everything, including taxes, so I guess I'll have to jst plug in the numbers...
-fixie