Author Topic: Where to up our retirement savings  (Read 2266 times)

Petuniajo

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Where to up our retirement savings
« on: August 14, 2015, 12:31:18 PM »
DH and I both work at public universities (different ones, but in the same state, so same access to same retirement plans). We have several retirement plan options, as follows:

401a: Required contribution of 6% of salary for this defined benefit (pension) plan. Cannot access the pension until age 62 (or, if we separate from the universities, our contributions plus a tiny amount of interest can be rolled over into a new retirement vehicle).

403b: Optional. Contributions up to 18k. Our universities provide a 100% match up to 5% of our pay. Money cannot be accessed without penalty until age 59.5.

457b: Optional. Contributions up to 18k. No match provided, but money can be accessed immediately with no penalty upon separation from the university (i.e., you can access it when you stop working, regardless of age). Able to choose own investments within the parameters of what they offer through TIAA-CREF or VALIC (we use TIAA-CREF for our 403bs, so we would likely use them for the 457 as well).

We currently contribute the required amount toward the pension, and also contribute up to the employer match with our 403bs. We have quite a bit of room to contribute more now, and we are thinking it would be wise to next start investing in the 457 plan, RATHER than upping our 403b contributions. We would have access to the same funds, the same pre-tax deductions, and with the benefit of being able to immediately access the money upon early retirement if we so wish.

We are glad to have access to so many retirement plans, but at this point cannot max out all accounts--for both of us together, that would be $72k per year (18k each for the 403b [plus match] and 457), *plus* the mandatory 6% for the pension. Hopefully one day we will get there! In the meantime, does it seem wise to prioritize the 457 over additional contributions to the 403b? I guess overall, I'm thinking it makes sense, after the 401a and contributing enough to get the maximum match for the 403b, to start investing in the 457 plan. Some day when we are able to max out both of our 457s, THEN we would start shoveling additional money into the 403bs?

Pooplips

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Re: Where to up our retirement savings
« Reply #1 on: August 14, 2015, 12:35:04 PM »
I have a 457 as well. I agree with your plan completely.

MDM

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Re: Where to up our retirement savings
« Reply #2 on: August 14, 2015, 12:37:53 PM »
In the meantime, does it seem wise to prioritize the 457 over additional contributions to the 403b? I guess overall, I'm thinking it makes sense, after the 401a and contributing enough to get the maximum match for the 403b, to start investing in the 457 plan. Some day when we are able to max out both of our 457s, THEN we would start shoveling additional money into the 403bs?
Yes, if you have no better options in the 403b than you have in the 457, the extra flexibility from the 457 wins.

Petuniajo

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Re: Where to up our retirement savings
« Reply #3 on: August 14, 2015, 12:49:51 PM »
In the meantime, does it seem wise to prioritize the 457 over additional contributions to the 403b? I guess overall, I'm thinking it makes sense, after the 401a and contributing enough to get the maximum match for the 403b, to start investing in the 457 plan. Some day when we are able to max out both of our 457s, THEN we would start shoveling additional money into the 403bs?
Yes, if you have no better options in the 403b than you have in the 457, the extra flexibility from the 457 wins.

I have been told that if we choose the same vendor, the fund options are the same, but I will double check directly with TIAA-CREF to be sure. So then I guess the follow up to that is... If hypothetically the fund options were NOT as good, would you still prioritize the 457 given its flexibility? How much worse would they have to be to prioritize the 403b instead? Answers will vary, I'm sure, but curious as to others' thoughts.

FLBiker

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Re: Where to up our retirement savings
« Reply #4 on: August 14, 2015, 12:57:35 PM »
My wife and I also both work at public universities.  For us, though, the vendors are worse for the 457.  At the same time, I recently got a raise so we're probably going to start doing a 457.  We currently max our 403bs and tIRAs.  Plus, our 457 just added Schwab so I think we can get Vanguard ETFs through that.

forummm

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Petuniajo

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Re: Where to up our retirement savings
« Reply #6 on: August 14, 2015, 01:09:20 PM »
I just double checked, and the fund offerings are the same for the 403b and the 457. So it sounds like the 457 as our next step is the best option.

I'm still a bit new to this game and trying to figure out the best place to stick our money. Learning so much from this forum! When I first started my job, I just chose one of the Life Cycle funds for my 403b... Looks like the expense ratio is .75%! I see now that the 403b and 457 do offer VINIX and VIEIX vanguard funds at much lower expense ratios (.04 and .08)...

MDM

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Re: Where to up our retirement savings
« Reply #7 on: August 14, 2015, 01:17:31 PM »
I have been told that if we choose the same vendor, the fund options are the same, but I will double check directly with TIAA-CREF to be sure. So then I guess the follow up to that is... If hypothetically the fund options were NOT as good, would you still prioritize the 457 given its flexibility? How much worse would they have to be to prioritize the 403b instead?
If the vendors are the same then it is likely the funds are the same.  Sometimes there are more vendors approved for the 403b than for the 457.

If there are better options in the 403b, I would desire more in the 403b.  At the same time I would ensure I had enough in the 457 and taxable accounts to get from retirement to age 59.5.