Questions:
1. The 457 seems preferable to the 403b for our situation because of the provision to access the money whenever you stop working for that employer with no penalty. Am I correct in this? The only downside seems to be that you can't draw that money while you work for your employer until 70.5...this should not be a concern for us.
Yes, so long as this is a governmental 457b. Since your wife works for a school, I would assume this is the case, but I would double check. This is important because governmental 457b funds are held in trust on the behalf of employees, whereas nongovernmental 457b funds are the property of the employer and can be subject to creditors in bankruptcy proceedings of the employer.
2. I understand I can contribute up to 18k to both of these accts for 36k total, is that correct? That is a little more than my wife's income but I figure I will take the answer from question 1 and max that acct first then trickle the rest into the other plan. I didn't see anything in her benefits package literature about limiting what % of your salary you can contribute to these plans.
Yes. And is 36k more than her actual gross income (well I guess her gross income + 7.65% for FICA)? I ask because it doesn't matter who in the married couple pays the taxes if filing MFJ, so long as all the taxes get paid (as in, your wife could set her withholding to zero and you could set up your withholding to pay all the taxes for both of you, it makes no difference to the IRS).
3. The main thing I am confused about is what to do with the 457 money when my wife stops working...ESPECIALLY if she stops working there to switch employers, but before we want to retire. I see that you can roll over 457 plans to IRA's like you could with a 401k, but am curious if doing this eliminates your penalty free draw advantage regardless of age and reclassifies that money to be the same as a normal IRA with the same penalty rules. Can someone shed light on this for me?
You can only rollover 457b plans to IRAs if it's a governmental 457b. Double check that it is in fact a governmental 457b.
And you are correct, that would remove the penalty free draw advantage regardless of age.
AMT rules are kinda whacky, but my understanding is you hit them if you have a high income and/or itemize a ton of deductions. I'm assuming you make a lot of money, especially considering you say that you've been investing in a taxable brokerage account. Based on this, I would definitely recommend your wife contributes to the max to a 403b, and also the max to the 457b so long as it is a governmental one. In fact, if it is governmental, I would max the 457b first (so long as the expense ratios of the funds available aren't terribly higher than the 457b's) because of the early withdrawal without penalty provision.