Author Topic: as a teacher...403b or 457 for retirement?  (Read 3376 times)

Fullbeard

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as a teacher...403b or 457 for retirement?
« on: December 28, 2016, 12:22:38 PM »
**from the wife of fullbeard**
Hello,

My husband has been looking into this site and we are using these forums to make better financial decisions and work towards more financial freedom. I am currently a teacher in DE. This is my second year teaching in DE. We have a retirement option of either a 403b or a 457. It looks like one will never be matched by an employer, but the other (while frozen now) has potential of being matched by an employer. I've looked up information, but am completely clueless when it comes to all this bank talk. I was wondering if any of you could help me figure out which would be best for me. As of now, I am not enrolled in anything. I don't think enrollment opens until May timeframe.

Thanks in advance,

Clueless ;)

Lagom

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Re: as a teacher...403b or 457 for retirement?
« Reply #1 on: December 28, 2016, 12:34:07 PM »
Always prioritize a match, but after that, for early retirement a 457 is vastly superior because you can start taking distributions at any time without an early withdrawal penalty. The main drawback (which hopefully should not apply because you are so on top of your finances) is that most 457s are not protected from bankruptcy.

Gin1984

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Re: as a teacher...403b or 457 for retirement?
« Reply #2 on: December 28, 2016, 12:35:48 PM »
Always prioritize a match, but after that, for early retirement a 457 is vastly superior because you can start taking distributions at any time without an early withdrawal penalty. The main drawback (which hopefully should not apply because you are so on top of your finances) is that most 457s are not protected from bankruptcy.
Also, they are considered the employer's property and subject to their creditors if not a governmental 457. 

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lbmustache

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Re: as a teacher...403b or 457 for retirement?
« Reply #3 on: December 28, 2016, 12:36:10 PM »
Following for more advice, lagom's is very helpful.

NoStacheOhio

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Re: as a teacher...403b or 457 for retirement?
« Reply #4 on: December 28, 2016, 01:29:32 PM »
Always prioritize a match, but after that, for early retirement a 457 is vastly superior because you can start taking distributions at any time without an early withdrawal penalty. The main drawback (which hopefully should not apply because you are so on top of your finances) is that most 457s are not protected from bankruptcy.
Also, they are considered the employer's property and subject to their creditors if not a governmental 457. 

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Wouldn't most public school 457s be governmental?

Gin1984

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Re: as a teacher...403b or 457 for retirement?
« Reply #5 on: December 28, 2016, 01:36:42 PM »
Always prioritize a match, but after that, for early retirement a 457 is vastly superior because you can start taking distributions at any time without an early withdrawal penalty. The main drawback (which hopefully should not apply because you are so on top of your finances) is that most 457s are not protected from bankruptcy.
Also, they are considered the employer's property and subject to their creditors if not a governmental 457. 

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Wouldn't most public school 457s be governmental?
She said teacher, which could be private or charter.  Charter school are not considered public entirely so I don't know where they sit for this rule.

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terran

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Re: as a teacher...403b or 457 for retirement?
« Reply #6 on: December 28, 2016, 02:15:31 PM »
If the 457 is governmental (for the reason mentioned above) I would base it mostly on the investment options available with a preference for the 457 for the early withdrawal options if the investments are similar. If you post you investment options, ideally including funds and expense ratios, people will be able to provide you better advice.

Fullbeard

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Re: as a teacher...403b or 457 for retirement?
« Reply #7 on: December 28, 2016, 02:48:41 PM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

Trifele

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Re: as a teacher...403b or 457 for retirement?
« Reply #8 on: December 29, 2016, 06:30:50 AM »
FYI -- you may be able to contribute to BOTH the 457 and the 403b, if that is something you'd be interested in.  I have both at work, and am able to contribute to each up to the annual maximum.

NoStacheOhio

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Re: as a teacher...403b or 457 for retirement?
« Reply #9 on: December 29, 2016, 06:59:07 AM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

charis

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Re: as a teacher...403b or 457 for retirement?
« Reply #10 on: December 29, 2016, 07:48:23 AM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Agreed - I think this is true for most states and even well established charters.

Lagom

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Re: as a teacher...403b or 457 for retirement?
« Reply #11 on: December 29, 2016, 10:32:49 AM »
Yes, I assumed you were covered by a government plan but if not, definitely go with the 403b for the reasons already mentioned. Although if they have a match in the 457, I would still contribute enough to maximize that option. Especially if you don't plan to stay at this school for more than a few years, you can always roll over that money into an IRA when you leave (albeit with the caveat that you'll lose the early withdrawal option).

NoStacheOhio

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Re: as a teacher...403b or 457 for retirement?
« Reply #12 on: December 29, 2016, 10:37:03 AM »
Yes, I assumed you were covered by a government plan but if not, definitely go with the 403b for the reasons already mentioned. Although if they have a match in the 457, I would still contribute enough to maximize that option. Especially if you don't plan to stay at this school for more than a few years, you can always roll over that money into an IRA when you leave (albeit with the caveat that you'll lose the early withdrawal option).

Depending on the tax hit, it might make sense to roll into a Roth.

terran

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Re: as a teacher...403b or 457 for retirement?
« Reply #13 on: December 29, 2016, 10:55:42 AM »
Yes, I assumed you were covered by a government plan but if not, definitely go with the 403b for the reasons already mentioned. Although if they have a match in the 457, I would still contribute enough to maximize that option. Especially if you don't plan to stay at this school for more than a few years, you can always roll over that money into an IRA when you leave (albeit with the caveat that you'll lose the early withdrawal option).

I don't actually think you can roll a non-governmental 457 into an IRA. I think you have to take the money as a taxable distribution or leave it in the 457 (where it will be subject to the entity's creditors).

Lagom

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Re: as a teacher...403b or 457 for retirement?
« Reply #14 on: December 29, 2016, 11:21:56 AM »
Yes, I assumed you were covered by a government plan but if not, definitely go with the 403b for the reasons already mentioned. Although if they have a match in the 457, I would still contribute enough to maximize that option. Especially if you don't plan to stay at this school for more than a few years, you can always roll over that money into an IRA when you leave (albeit with the caveat that you'll lose the early withdrawal option).

I don't actually think you can roll a non-governmental 457 into an IRA. I think you have to take the money as a taxable distribution or leave it in the 457 (where it will be subject to the entity's creditors).

Hmm, I have a governmental 457 which is where I have received most of my info, but upon further googling, it appears you are right for non governmental 457s. Seriously, what is the point of those??

That said, depending on the match, it might still be worth it, even if you have to take the money as a taxable distribution when you leave.
« Last Edit: December 29, 2016, 06:20:59 PM by Lagom »

mustachianteacher

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Re: as a teacher...403b or 457 for retirement?
« Reply #15 on: December 29, 2016, 01:22:46 PM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

terran

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Re: as a teacher...403b or 457 for retirement?
« Reply #16 on: December 29, 2016, 02:48:49 PM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

The key is that non-governmental 457s are subject to the creditors of the sponsoring institution. Always something to be careful of, but presumably the above comment is an allusion to poor economic viability of the charters in Ohio and/or employees not being government employees (and therefore the 457 being non-governmental).

aceyou

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Re: as a teacher...403b or 457 for retirement?
« Reply #17 on: December 30, 2016, 05:46:26 AM »
Yeah, I think it's been summed up already.

I am a public school teacher and use both.  If I were only able to fill up one I'd do the 457 first.  A year ago my options were better for my 403 so I did that one.  Since then the options are now identical, so that's not an issue. 

Pros:
- Penalty free withdrawal after leaving
- If you have that AND a 403, you can fill up both. 

Cons:
- If non governmental, it's less protected
- Might have worse investing options. 


NoStacheOhio

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Re: as a teacher...403b or 457 for retirement?
« Reply #18 on: December 30, 2016, 07:24:56 AM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

The key is that non-governmental 457s are subject to the creditors of the sponsoring institution. Always something to be careful of, but presumably the above comment is an allusion to poor economic viability of the charters in Ohio and/or employees not being government employees (and therefore the 457 being non-governmental).

Every charter school I've heard about in Ohio is basically a thinly veiled fraud scheme.

Frugalman19

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Re: as a teacher...403b or 457 for retirement?
« Reply #19 on: December 30, 2016, 08:20:35 AM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

A large number of charters are fraudulent. Check out John Oliver's piece on charter schools.

Gin1984

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Re: as a teacher...403b or 457 for retirement?
« Reply #20 on: December 30, 2016, 09:46:33 AM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

A large number of charters are fraudulent. Check out John Oliver's piece on charter schools.
Also, keep in mind, the 457 is open to the school's creditors.  Quick google on charter schools and bankruptsy:
https://www.google.com/search?q=charter+schools+banruptsy&oq=charter+schools+banruptsy&aqs=chrome..69i57.9247j0j7&sourceid=chrome&ie=UTF-8#q=charter+schools+bankruptcy

mustachianteacher

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Re: as a teacher...403b or 457 for retirement?
« Reply #21 on: December 30, 2016, 12:25:17 PM »
Hey all,

Thanks for all the quick feedback. The information that some of you are asking for in order to give me a better response is information I can't give until after this winter break. My login info is all at the school but as soon as I get it, I can update this thread.

Also, I'm not sure if this makes a difference but I work for a Charter school.

Thanks again!

If your Charters are anything like the ones in Ohio, I wouldn't touch the 457 with a ten foot pole.

Curious as to why? I work for an affiliated charter in CA -- this is not the same as an independent charter -- and we have access to both a 403b and a 457 as well. I contribute to both, but more to the 403 because the 457 fees are high.

A large number of charters are fraudulent. Check out John Oliver's piece on charter schools.
Also, keep in mind, the 457 is open to the school's creditors.  Quick google on charter schools and bankruptcy:
https://www.google.com/search?q=charter+schools+banruptsy&oq=charter+schools+banruptsy&aqs=chrome..69i57.9247j0j7&sourceid=chrome&ie=UTF-8#q=charter+schools+bankruptcy

That makes sense, as far as independent charters go. An affiliated charter is still affiliated with the school district, which begs the question: What happens if my school district has financial problems? Reading through some of the links isn't very encouraging. The fiscal instability of my school district is one of the key motivators to FIRE.