Author Topic: Fees on 457  (Read 1395 times)

MountainTown

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Fees on 457
« on: July 29, 2017, 10:51:43 PM »
So I have recently gotten excited to learn about 457's from millionaireducator as my wife has access to them. We share all our money so we agreed it would be good to redirect retirement savings there(we are also maxing out my TSP).

The investment options are good, plenty of low cost index funds. What bothers me is that the "asset management" fee from the 457 plan is something around .44%.

This seems like a lot to me. I only have one active fund that is .40 and the only reason I have kept it is because it's international and it has consistently beat the benchmarks by 2 points.

My question is do the 457 tax deferred/withdrawal benefits outweigh this fee? Like I said it seems really high to me but maybe I am just used to my ultra low tsp fees and vanguard fees.

For now my plan is to ask her to stick with it as it seems like the tax benefits and the possible FI benefits do outweigh it...it's just unfortunate they are hosing their employees

Thanks!

MDM

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Re: Fees on 457
« Reply #1 on: July 29, 2017, 10:57:17 PM »
See To 401k or not to 401k? That is the question.  You can substitute "457" for "401k".

jjandjab

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Re: Fees on 457
« Reply #2 on: July 30, 2017, 12:57:48 PM »
The 457 is an interesting investment. There are two main question I have:

1.) Is this a government 457 or non-government. I ask since if a non-government plan (I have one at my non-profit hospital), then the assets are not guaranteed and can be at risk if the organization goes into bankruptcy, etc. It's rare, but it does mean the assets aren't really "yours" - even thought they come out of your paycheck - until you leave the job. It's kind of strange. But the government plans are protected.

2.) What's your tax bracket - If you are higher now than you will be down the line, then it makes sense. I have a combined tax rate of almost 35%. My plan charges a 0.31 management fee. So if I max it out at 18k per year, I save a little over 6k in taxes while I pay about $60 a year in fees.

Finally, the 457 is interesting in those considering early retirement. When you leave your job, you can take the 457 money out of the plan without an early withdrawal penalty. You do pay the income tax, but you have instant access to money, almost like saving for your own severance package...

I contribute to a non government (so not protected) plan, but feel the benefits outweigh the negatives. But I might get nervous if I hear the organization starts hitting some rough financial times..

MDM

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Re: Fees on 457
« Reply #3 on: July 30, 2017, 01:21:42 PM »

MountainTown

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Re: Fees on 457
« Reply #4 on: July 30, 2017, 05:10:09 PM »
It is governmental. We make 120k a year. Not sure exactly what our tax rate is as it has been fluctuating with deferred investments lately...I suppose that puts us in the 20% to 25% range though without deferred investments