Author Topic: 457 teacher help  (Read 1546 times)

JDS

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457 teacher help
« on: December 16, 2017, 07:21:45 AM »
I work as a welding instructor at a college in Pennsylvania. It is a great job.  I pay roughly 10% to the state teacher pension system. The pension vests after 10 years. I'm 31 with 6.5 years of service. The pension pays .025 X  years of service  X average of 3 highest years salary. 2018 will be the last year that it is available for new teachers entering the system.

After listening to the chooseFI podcast with the millionaire educator I got motivated to look into adding a 457 account. I am able to enroll in the state employees retirement system differed compensation plan. I would like some recommendations on what fund or funds to choose. I know very little about this program. How do the fees look for this plan? Thanks!

My solo 401k is in Vanguard VTSAX. I guess I would like something similar.

https://sers457.empower-retirement.com/participant/#/articles/Pennsylvania/investmentInformation

Investment information
A wide variety of core investment options are available through your 457 Plan. Each option is explained in more detail below.
Fund overview
Provides each investment’s objective and holdings as well as a breakdown of assets by industry, risk level and fund manager
Fund fact sheets
Asset Allocation
Aggressive Portfolio Fund
Conservative Portfolio Fund
Moderate Portfolio Fund
International
International Company Stock Index Fund
Mid Cap
U.S. Small/Mid Company Stock Index Fund
Large Cap
U.S. Large Company Stock Index Fund
Balanced
60/40 Balanced Stock & Bond Fund
Bond
U.S. Bond Index Fund
Fixed
Stable Value Fund
Money Market
Short-Term Investment Fund
Brokerage
Schwab SDB Sweep Program
Schwab SDB Securities
Schwab SDB Sweep Program Roth
Schwab SDB Securities Roth
« Last Edit: December 16, 2017, 07:42:05 AM by JDS »

DavidAnnArbor

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Re: 457 teacher help
« Reply #1 on: December 16, 2017, 07:25:31 AM »
I'd do:

45% International Stock Index Fund

10% U.S. Small/Mid Company Stock Index Fund

45% U.S. Large Company Stock Index Fund

maizeman

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Re: 457 teacher help
« Reply #2 on: December 16, 2017, 07:30:32 AM »
I pay roughly 10% to the state teacher pension system. The pension vests after 10 years. I'm 31 with 6.5 years of service. The pension pays .25 X  years of service  X average of 3 highest years salary.

Is there something missing from this formula? If I plug 10 years of service, I get that you'd retire with 250% of your average salary over the three highest years, which would be awesome but seems implausibly generous.

For the 457 options, are you able to find the expense ratios for each fund option?

JDS

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Re: 457 teacher help
« Reply #3 on: December 16, 2017, 07:43:01 AM »
That was a typo I changed it to .025. 40 years service is 100% pay at retirement age.

maizeman

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Re: 457 teacher help
« Reply #4 on: December 16, 2017, 07:44:52 AM »
Gotcha, that makes more sense. Looking over your funds some more I tend to agree with David's suggestions, but I do think checking the expense ratios is important before you make any final decisions.

JDS

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Re: 457 teacher help
« Reply #5 on: December 16, 2017, 07:57:18 AM »
« Last Edit: December 16, 2017, 08:00:41 AM by JDS »

maizeman

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Re: 457 teacher help
« Reply #6 on: December 16, 2017, 08:14:16 AM »
Nice! In that case you are all set.

facepalm

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Re: 457 teacher help
« Reply #7 on: December 16, 2017, 07:25:25 PM »
Fellow teacher here. You haven't mentioned how tolerant you are of risk (unless I missed it). Are you comfortable with 100% of your money in equities? In a down market?

Before picking your funds, you should give some thought to asset allocation. See this article:

https://www.bogleheads.org/wiki/Asset_allocation

I'd personally want some exposure to bonds, and would lean toward a total market fund and an international fund to round it out.

I highly recommend reading through the Bogleheads site, as well as JLCollins' stock series.

http://jlcollinsnh.com/stock-series/