Author Topic: 457 but it's an annuity  (Read 535 times)

Neustache

  • Handlebar Stache
  • *****
  • Posts: 1188
457 but it's an annuity
« on: September 30, 2018, 03:44:47 PM »
Hello!

I'm a brand new teacher and I met with our districts financial rep.  I wanted info on the district's plans and I have the option of a 403b and a 457.  However, the fees seem high at 1.43% and the rep says it's an annuity, but it's basically the same as mutual funds but with a death benefit.  The annuity word threw me off - I feel like most people say to stay away from them due to fees. 

Should I still take advantage of it for tax purposes?  I was going to fill up one pre-tax and then try to fill up the other one post-tax.  These are the only tax advantaged accounts that we have available to fill.  We contribute the max to our IRAs and to my husband's pension plan.   

Thoughts?

RWD

  • Magnum Stache
  • ******
  • Posts: 3418
  • Location: Mississippi
Re: 457 but it's an annuity
« Reply #1 on: September 30, 2018, 07:59:28 PM »
1.43% is highway robbery and I'd be hard pressed to invest in that out of principle alone. I believe there are some calculators that can help you determine whether it is still worth it. Mostly it comes down to a function of your tax bracket and how many years the fees will reduce your compounding.

I'd be worried about it being called an annuity too. You shouldn't invest in something you don't understand, so more info needs to be obtained here.

bacchi

  • Magnum Stache
  • ******
  • Posts: 3876
Re: 457 but it's an annuity
« Reply #2 on: September 30, 2018, 08:48:55 PM »
Gah, that's unfortunate. A 457 is a fantastic plan for early-retirees, unless it has an annuity and then it's hit-or-miss (mostly miss).

Skip the annuity until you've done the numbers on it.