Author Topic: 403b or 457b?  (Read 3117 times)

rageth

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403b or 457b?
« on: April 30, 2015, 02:50:16 PM »
Hi,

I am looking into my employer-sponsored (no employer contributions) 403b and 457 plans, but I have a few questions.  My employer only offers 457 plans through North Shore Bank.  However, they offer 403b plans through:
AETNA - ING FINANCIAL
AIG RETIREMENT - VALIC
AMERICAN CENTURY INVESTMENTS
AMERICAN FUNDS - CAPITAL GUARDIAN
AMERIPRISE FINANCIAL
AXA - EQUITABLE
FIDELITY INVESTMENTS
FRANKLIN TEMPLETON INVESTMENT SERVICE
HORACE MANN LIFE INSURANCE COMPANY
MET LIFE OF CONNETICUT/TRAVELERS
MET LIFE INVESTORS
SECURITY BENEFIT LIFE INSURANCE COMPANY
THRIVENT FINANCIAL - AAL
WADDELL & REED
WEA
403 (B) ASP/ASPIRE
AIM FUND SERVICES
EDWARD JONES

With my goal being RE, I know that 457 is the preferred route as far as early withdrawal goes, however, I am not sure if the wider variety of options for the 403b would provide me with better investment options and end up being the better route.  Does anyone have any experience with North Shore Bank?  Or have any thoughts on my options?

I had opened a Roth before finding MMM through Waddell and Reed, but I'm also trying to see if I can stop funding my Roth and instead fund the tax-deferred account I choose (457 or 403) until I'm saving enough yearly to reach the $17,000 yearly limit and then start funding the Roth again.

Thank you for your thoughts!

GGNoob

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Re: 403b or 457b?
« Reply #1 on: April 30, 2015, 02:55:23 PM »
Do you know what funds are available or what the fees are for your 457?

For the 403b, Fidelity is probably your best bet.

I'm currently maxing out both my 457 and 401k. I prioritized the 457 first. It will be fantastic since I don't need to build up my first 5 years expenses for early retirement in a taxable account.

Rural

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Re: 403b or 457b?
« Reply #2 on: April 30, 2015, 03:51:50 PM »
Is your employer a nonprofit or a governmental entity? It matters because governmental 457s are protected from employer bankruptcy but nonprofit ones are not. Also you have more rollover options with a governmental 457.


+1 to Fidelity almost sure to be the best option in that 403b.

forummm

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Re: 403b or 457b?
« Reply #3 on: April 30, 2015, 04:24:25 PM »
Just max them both out. And your IRA and your spouse's (if you have one). :)

BarkyardBQ

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Re: 403b or 457b?
« Reply #4 on: April 30, 2015, 05:16:07 PM »
Weigh your options against fund choice, expense ratio and overall tax bracket (can contributing drop you a tax bracket?)

2015 Contribution limit is $18,000*

W&R is expensive, create an account with Vanguard, and have them transfer the ROTH...

You're better off contributing to your 457 and/or 403b, because it lowers your withholding where IRA contributions go in after taxes.

If you can open both a 457 and 403, but not max out both + an IRA, and contribute to your 403b everything you would invest in the IRA (a Traditional at Vanguard)... and then some. This way, when you leave the employer or retire, you can roll the 403b into the IRA and start a Roth Conversion Ladder... and live off the 457.

rageth

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Re: 403b or 457b?
« Reply #5 on: April 30, 2015, 07:43:23 PM »
Do you know what funds are available or what the fees are for your 457?

I sent them an email earlier asking about exactly that because they don't have it listed on their website which automatically makes me suspicious.  The funds available are

Heartland Value Plus HRVIX
Nicholas Equity Income NSEIX
Transamerica Partners Mid Value DVMVX
Transamerica Partners Large Core DVGIX
Transamerica Partners Stock Index DSKIX
Transamerica Partners Large Growth DVGEX
Nicholas Fund NICSX
Nicholas II Fund NCTWX
Nicholas Limited Edition Fund NCLEX
Morgan Stanley Mid Cap Growth A MACGX
BlackRock Equity Dividend R MRDVX
BlackRock Target Date Fund (2020, 2030, 2040) STLCX/STLDX/STLEX
American Funds Europacific Growth R3 RERCX
American Funds Fundamental Investment R4 RFNEX
Royce Pennsylvania Mutual Consult RYPCX


rageth

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Re: 403b or 457b?
« Reply #6 on: April 30, 2015, 10:43:03 PM »
After much digging, I was able to find the expense ratios of the funds I listed before at the very least, though the fees I've still yet to uncover.  Here again I'll list the funds with the associated fees.  Thanks for all of your advice.  It is much appreciated!

Heartland Value Plus HRVIX    1.14%
Nicholas Equity Income NSEIX    0.76%
Transamerica Partners Mid Value DVMVX    1.30%
Transamerica Partners Large Core DVGIX    1.26%
Transamerica Partners Stock Index DSKIX    0.69%
Transamerica Partners Large Growth DVGEX    1.25%
Nicholas Fund NICSX    0.75%
Nicholas II Fund NCTWX   0.63%
Nicholas Limited Edition Fund NCLEX   0.87%
Morgan Stanley Mid Cap Growth A MACGX   0.96%
BlackRock Equity Dividend R MRDVX    1.24%
BlackRock Target Date Fund (2020, 2030, 2040) STLCX/STLDX/STLEX
American Funds Europacific Growth R3 RERCX    1.14%
American Funds Fundamental Investment R4 RFNEX  0.66%
Royce Pennsylvania Mutual Consult RYPCX    1.95%

Any thoughts?

Is your employer a nonprofit or a governmental entity? It matters because governmental 457s are protected from employer bankruptcy but nonprofit ones are not. Also you have more rollover options with a governmental 457.

I'm a teacher, so my employer is the state of Wisconsin.  I don't think I have to worry.

Weigh your options against fund choice, expense ratio and overall tax bracket (can contributing drop you a tax bracket?)

2015 Contribution limit is $18,000*

W&R is expensive, create an account with Vanguard, and have them transfer the ROTH...

I will be married filing jointly starting this year and our yearly gross income is in the $65k range, so contributing will not drop us down a tax bracket.  I will be transferring over to Vanguard and seeing if I can do a Roth recharacterization to switch to a traditional IRA.

teen persuasion

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Re: 403b or 457b?
« Reply #7 on: May 01, 2015, 07:50:31 AM »
Whether you drop a bracket would depend on how much you contribute.  Clearly you have the options to get to zero taxable income if you fully contribute to everything.  Whether your budget would allow it is another question.

$65k - 18k - 18k - 5.5k - 5.5k = 18k < std deduction + 2 personal exemptions

Don't forget about the retirement savers credit - as MFJ, if you and your spouse each contribute to retirement accounts you could drive your tax down a bit more.  Each contributing at least $2k would get your combined max credit for this, so even if your spouse is a SAHP make sure to contribute to a spousal tIRA in their name, as well as your retirement accounts.