Author Topic: 457b or Taxable Vanguard?...Question concerning fund selection and fees.  (Read 3922 times)

DCW

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Hello all! Long time reader here. I have a specific question to anyone who can give me some guidance (or who is good at "crunching the numbers")

I'm 26, and currently a few months away from eliminating all of my student loan debt, which is the only debt I have. $40,000 in 4 years! Go me, haha!

Once the debt is paid off, I'll have a significant amount of cash flow to dedicate to investments. My plan once my loans are paid off are to invest 50-70% of my income (more if I can downsize my lifestyle a tad bit more), and to continue to live the lifestyle we all choose to live. I'm already contributing to a pension fund, as well as maxing out a Roth IRA every year through Vanguard (since 2012) investing in index funds. The rest of my discretionary income is what my question concerns.

I'm a newly minted Police Officer about halfway through my first year (it's been a blast!), and am eligible to contribute to a 457b plan. Our local government uses Nationwide as the provider. I've held off contributing thus far to pay off all of my debt, but will soon be ready to contribute. My question is in reference to 1) the fund selections I have available to me, and 2) the fees associated with it.

You can find the funds available to me here:
https://www.nrsforu.com/iApp/rsc/fundPerformanceViewPreLogin.x

My question is this: I want to be able to max out the 457b (as it's fantastic in that I plan to FIRE and am not required to pay the 10% early withdrawal penalty, in addition to the tax benefits), and I'm looking for something that is as close to VTSAX as I can find to put my money to work in. From the selections I'm given, it appears to me that the closest thing is the Nationwide S & P 500 Index Fund with an expense ratio of .46.

**Is my best option to... 1) max out my 457b, and invest in this fund? 2) max out the 457b with another fund from my selection (or a combination of funds)? or 3) forgo the plan and instead open a taxable account at Vanguard?

High expense ratios kill returns, and in addition I'm not familiar enough with Nationwide to be able to make the call and establish whether or not their funds will provide me the benefit of utilizing the 457b or just open a taxable account with Vanguard.

FYI, income will be somewhere between 47K and 60K per year (depending on how much overtime I accumulate). I contribute 6% salary to pension, and am exempt from FICA. Live and work in Indiana. Single, no kids.

DCW

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #1 on: February 12, 2014, 11:41:37 PM »
Oops. URL not working. I've attached screen shots of the available funds. And yes, I had to look up how to take a screenshot ;)


DCW

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #2 on: February 12, 2014, 11:42:49 PM »
...pics cont...

iamlindoro

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #3 on: February 12, 2014, 11:52:10 PM »
Bogleheads has a good page on approximating the total market fund.  In essence, you would pick the right ratio of S&P 500, mid, and small cap index funds.  It looks like you have access to at least one decent option for each with modest expense ratios (though obviously still far above Vanguard funds).

http://www.bogleheads.org/wiki/Approximating_total_stock_market

DCW

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #4 on: February 13, 2014, 03:21:11 PM »
Thanks! That page helps out quite a bit.

the fixer

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #5 on: February 13, 2014, 03:30:08 PM »
Note that you can buy the extended market index fund in another account, it doesn't have to be together with the 457b. For instance, it could be owned in your Roth IRA. You can use a taxable account but it should be as a last resort, after you've maxed everything else.

gillstone

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Re: 457b or Taxable Vanguard?...Question concerning fund selection and fees.
« Reply #6 on: February 13, 2014, 03:54:51 PM »
Awesome work killing 40k in debt in 4 years! Go with maxing the 457, its the best gift to FIRE-makers since The Great Bogle shined the light of Index Funds upon us.  You don't have to be 60 to access it, all you have to do is leave your job.  You have the 10% in taxes to pay (which you would have had to pay anyways at possible higher rates) but no penalties.