457b accounts are absolutely fantastic for early retirement because there are no early withdrawal penalties. You would just need to pay ordinary income tax on the withdrawals. I am currently maxing my traditional 457b. My employer will be offering a ROTH 457b next year. From what I've read from the plan and online the roth may not be a good option for early retirees. Early withdrawals from a Roth 457 plan are also not subject to a ten percent penalty. However, early withdrawals ARE subject to ordinary income taxes. Withdrawals from a Roth 457 plan after age 59 1/2 are both tax-free and penalty free.
I pay taxes upfront, then contribute to the roth 457b. Then that money is taxed again if I withdraw before 59 1/2. So I paid taxes twice on this money? Am I missing something?
Should I contribute to traditional only? The tax-free withdrawals after 59 1/2, even on gains, is tempting though. Should I split my contributions between roth and tradtional? Thoughts and opinions welcome.