Author Topic: 457 help?  (Read 8447 times)

Psychstache

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457 help?
« on: October 08, 2012, 09:00:55 PM »
Hey MM community,

I have another quick question that I am hoping someone can clarify. I work for a local school district and have been trying to figure out they best way to allocate my retirement savings. There are a lot of different options. I have been contributing to a Roth IRA for about a year now, but want to diversify with some tax-deferred options. I have set up a 403(b) (yay for Vanguard being an approved vendor) and now I am starting to research the option of a 457.

1. Do you think it is still worthwhile to invest in the 457 if I can't select the investment products? It looks like it is managed by a firm chosen by a council made up of various district superintendents. I briefly looked at the prospectus and it look like 60-40 stocks-to-bonds with a 10 year return of 7.7% and a 0.45% expense ratio.

2. I am confused about accessing the money before 70.5. Can I just take out what i need and pay taxes on that, like do that once a month or once a year? Is so, that seems like a great way to create an income stream before 59.5, but the way it was worded it looked like I had to completely withdraw it and pay the taxes on the entire balance or roll it into another retirement vehicle like the 403(b).

Thanks for all the help!!

arebelspy

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Re: 457 help?
« Reply #1 on: October 08, 2012, 09:12:07 PM »
I can address question 2.

The way a 457 works is that if you no longer work for that company, you can withdraw the money without any penalties, regardless of age.  You still pay taxes obviously (you would even if you were 100 years old and withdrawing it, that's how the tax deferred accounts work), but no penalties.

So it's very ideal for someone looking to ER...
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rtrnow

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Re: 457 help?
« Reply #2 on: October 09, 2012, 09:44:47 AM »
I'm not sure on question one either. It seems like the expense is high, but wold that be offset by the pretax advantage? 457 plans vary a bit from employer to employer but you should not have to withdraw the entire sum. I know mine is that way. My plan is fortunately administered by TIAA CREF and I can direct the investments.

fiveoh

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Re: 457 help?
« Reply #3 on: October 09, 2012, 11:59:58 AM »
Check out http://403bwise.com/participants/getwise_457b.html lots of info on the 457b.  My wife is in a similar situation and we are trying to max the 403b before we even think about a 457b.... mainly due to the fact you have no control over your money(i.e. they invest it for you in what they feel is acceptable).   

arebelspy

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Re: 457 help?
« Reply #4 on: October 09, 2012, 12:21:22 PM »
Check out http://403bwise.com/participants/getwise_457b.html lots of info on the 457b.  My wife is in a similar situation and we are trying to max the 403b before we even think about a 457b.... mainly due to the fact you have no control over your money(i.e. they invest it for you in what they feel is acceptable).

I disagree.  In fact, the 403b and 457b are the exact same, with the only exception being that when you stop working you can access the 457 any time without penalty, but the 403 you have to wait until 59 1/2.

If there is a difference in what you can invest in your 457 and 403 it is due to the administrator of your plan, not anything inherent in a 457 or 403 itself.

That'd be like saying an IRA is superior to 401k because of what you can invest in.. it's simply not true, although it may be the case for you.

In almost all early retiree's circumstances a 457 will be much better than a 403.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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TheDude

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Re: 457 help?
« Reply #5 on: October 09, 2012, 01:30:41 PM »
The other significant advantage of a 457 is that you can max it out (17K) and max out a 401K/403B (17K). So you can shield 34000. Damn I wish my wife's school would get it together an offer a 457.

fiveoh

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Re: 457 help?
« Reply #6 on: October 09, 2012, 04:33:41 PM »
Check out http://403bwise.com/participants/getwise_457b.html lots of info on the 457b.  My wife is in a similar situation and we are trying to max the 403b before we even think about a 457b.... mainly due to the fact you have no control over your money(i.e. they invest it for you in what they feel is acceptable).

I disagree.  In fact, the 403b and 457b are the exact same, with the only exception being that when you stop working you can access the 457 any time without penalty, but the 403 you have to wait until 59 1/2.

If there is a difference in what you can invest in your 457 and 403 it is due to the administrator of your plan, not anything inherent in a 457 or 403 itself.

That'd be like saying an IRA is superior to 401k because of what you can invest in.. it's simply not true, although it may be the case for you.

In almost all early retiree's circumstances a 457 will be much better than a 403.

The OP has a plan that is similar to the one available to my wife "It looks like it is managed by a firm chosen by a council made up of various district superintendents. I briefly looked at the prospectus and it look like 60-40 stocks-to-bonds with a 10 year return of 7.7% and a 0.45% expense ratio."  This is not a plan that you pick your funds or stocks,  they manage it and you get what they give you.

arebelspy

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Re: 457 help?
« Reply #7 on: October 09, 2012, 04:48:02 PM »
The OP has a plan that is similar to the one available to my wife "It looks like it is managed by a firm chosen by a council made up of various district superintendents. I briefly looked at the prospectus and it look like 60-40 stocks-to-bonds with a 10 year return of 7.7% and a 0.45% expense ratio."  This is not a plan that you pick your funds or stocks,  they manage it and you get what they give you.

What's the 403 like?

I find it odd for a plan administrator to offer different things in a 403 and 457 when they are just about the same thing.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

fiveoh

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Re: 457 help?
« Reply #8 on: October 09, 2012, 06:07:58 PM »
The OP has a plan that is similar to the one available to my wife "It looks like it is managed by a firm chosen by a council made up of various district superintendents. I briefly looked at the prospectus and it look like 60-40 stocks-to-bonds with a 10 year return of 7.7% and a 0.45% expense ratio."  This is not a plan that you pick your funds or stocks,  they manage it and you get what they give you.

What's the 403 like?

I find it odd for a plan administrator to offer different things in a 403 and 457 when they are just about the same thing.

The 403 you can choose your own... we use vanguard, there are over 20 different brokers to choose from.  I think in our case the 403 and 457 are run by 2 different companies, might explain it.  Maybe ksaleh has better options, I was just saying that sometimes there are different investment choices for each plan and that should be taken into consideration not just the tax breaks/withdrawl methods.

Psychstache

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Re: 457 help?
« Reply #9 on: October 09, 2012, 06:37:05 PM »
fiveoh has got it right. my 403b is set up though VG in my own as one of the many options. the 457 is just the one plan option, take it or leave it.

rebel, you are probably confused because you tried to apply logic to a school system. it's a common rookie mistake.

fiveoh, saw the pm will respond later tonight.

arebelspy

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Re: 457 help?
« Reply #10 on: October 09, 2012, 07:55:12 PM »
How unfortunate.  They just need to make Vanguard an option in the 457. ;)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

rtrnow

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Re: 457 help?
« Reply #11 on: October 10, 2012, 07:59:30 AM »

rebel, you are probably confused because you tried to apply logic to a school system. it's a common rookie mistake.


After years working with school systems, I know you are all too right. However, I didn't realize I was so lucky to have a 457 that I can direct myself. I personally take the route of max 457 then put what I can in a roth 403b.