Author Topic: Looking for some help with my 457b dilemma  (Read 514 times)

fourfive

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Looking for some help with my 457b dilemma
« on: November 18, 2019, 09:29:54 PM »
This is my first post, been reading for years.  Thanks in advance to anyone who can help.

Background:  In January I will be retiring from a full-time government job.  I will be doing consulting work that will cover more than my expenses for the next two years minimum and my Wife is still working full time.  I have a pension and a 457b through Valic.  The issue I have is with the Valic 457b.

The Valic 457b has 150k invested in the Valic Stock Index Fund (VSTIX) which is an S&P 500 Index fund.  This is also one of the "cheapest" expense ratios available at .34!  Now that I am much more informed, I realize how much the expense ratios and fees impact my investment.  Even worse is that that the account is invested in a variable annuity which tacks on another 1% M&E fee, so my S&P 500 Index fund is costing me 1.34% annually in fees.  I realize this stinks and I'm looking for any advice on the matter.  I definitely do not want the annuity so I'm paying 1.3 more than I need to to invest in a S&P 500 index fund, shame on me for not learning more about it when I signed up for it 20 years ago! 

The main reason why I'm hesitant to roll it into an IRA is that I'm 43 and like option of withdrawing from this account in early retirement without a 10% fee prior to 59 1/2 (should I need to).  I am passed the surrender fee times so I can surrender the account without any penalty and transfer the 150k to a taxable account but then I'm stuck with a huge tax issue.  Any other ideas or perspectives would be great to hear!  Thanks so much.

MDM

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Re: Looking for some help with my 457b dilemma
« Reply #1 on: November 18, 2019, 10:25:23 PM »
...option of withdrawing from this account in early retirement without a 10% fee prior to 59 1/2 (should I need to).
With your other sources of income, what's your estimate of the "need to" likelihood?

If you don't need it until age 70 (or later), what opportunities do you foresee for converting it to Roth at favorable tax rates before RMDs force withdrawal?

DadJokes

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Re: Looking for some help with my 457b dilemma
« Reply #2 on: November 19, 2019, 06:31:50 AM »
How soon you think you'll need this will dictate the best course of action.

Does your wife plan to be working for another five years?
And can you live on her income alone?

fourfive

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Re: Looking for some help with my 457b dilemma
« Reply #3 on: November 19, 2019, 09:18:01 AM »
How soon you think you'll need this will dictate the best course of action.

Does your wife plan to be working for another five years?
And can you live on her income alone?

My wife is planning on working full time for a minimum of 7 more years (which puts me at 50), I will be making a good part time income for at least 2 more years.  If all goes as planned we wouldn't need to touch the 457 until after that.  The plan would be to draw what is necessary from our taxable account and 457 until I reach 59 1/2 where I can then draw from my pension rollover IRA. 

DadJokes

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Re: Looking for some help with my 457b dilemma
« Reply #4 on: November 19, 2019, 09:35:24 AM »
If you plan to start drawing on it after your contract ends, then there probably isn't a large benefit to moving it anywhere. If you could get by entirely on your spouse's income before she retires (or supplement that with your taxable accounts), then a Roth ladder might work. It could also be such a small difference that it's not worth the hassle. The 1.34% is about $2k in fees annually. Is that worth jumping through hoops?

You also might get a better response if you post a case study in that section with your full numbers. It's easier to give advice with the full picture.

fourfive

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Re: Looking for some help with my 457b dilemma
« Reply #5 on: November 19, 2019, 10:20:01 AM »
If you plan to start drawing on it after your contract ends, then there probably isn't a large benefit to moving it anywhere. If you could get by entirely on your spouse's income before she retires (or supplement that with your taxable accounts), then a Roth ladder might work. It could also be such a small difference that it's not worth the hassle. The 1.34% is about $2k in fees annually. Is that worth jumping through hoops?

You also might get a better response if you post a case study in that section with your full numbers. It's easier to give advice with the full picture.

Thanks for the input.  We will definitely be living off wife’s income for the seven years so the Roth ladder sounds like a really good option.  Thank you very much.