First off, don't be sorry that this is confusing. Our tax code is stupidly complicated. It's like that to take as much money from us as possible. The internet has let us band together for self-defense.
On 457(b) and 403(b) and school districts:
I had a very long talk with one of the companies that services our districts 403/457 plans. Mostly I wanted to know why the f*** the prospectuses they gave us included funds we couldn't actually buy. There are 5 companies to choose from, and each one has a huge list of funds. I picked one that listed some Vanguard funds I could live with, but then once I was signed up none of those funds was a choice on my elections.
The deal here is that over time the offerings have changed, and so the paperwork shows every fund they have ever offered, while the company itself is only allowed to offer funds approved by whoever the district has appointed to that task. So each company puts together a group it thinks is good, and then some asshole somewhere approves or disapproves. It generally goes like,
"why isn't there a gold fund?"
"Well gold isn't really..."
"Well some of our teachers want gold!"
"sigh....alright, what should we swap out for that, because you only let us have 10 funds."
"Drop this, what is this, index fund? that sounds boring."
The district definitely didn't appoint one of their best and brightest. The companies servicing these plans definitely took whoever it was out to lunch, and everyone should be pissed at how this works.
For now, the return you get via the tax deferral is going to be between 15% and 25%, depending on what you put in. The higher fees and stuff will take a long time to wipe out this benefit. So short term you win by putting money away here. Long term, you can change jobs/districts/retire and rollover to your IRA account and get the money working a little smarter. You lose the advantages of a 457 plan by doing this, but there are ways to access your IRA funds pre 59.5, detailed, I dunno, here:
http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/The law may change etc etc but it's likely the SEPP method will still be available.
Long term, you can find out who it is in the district that picks/approves the funds and hound them for a meeting and then drop some financial literacy on their ass. There's some kind of teacher's union that may be able to help with this. Most of the time the people doing it just have no idea what they are doing.
So married filing jointly, just a quick estimate, and I don't know how state income tax works because Texas is awesome:
$50,000 of income in 2015. Standard deduction is $12,600. You won't get this if you itemize, so that decision is to total up all your itemized deductions and see which is larger, itemized or standard. I itemize every other year, paying the large lumps of property taxes within the same calendar year (January 2015 for 2014 taxes, December 2015 for 2015 taxes). This nets me just enough deductions to itemize. I also know that this year is a good year to have a baby or other similar silly medical thing. I try to pile on any other deductions I can find for an itemize year.
But with $12,600 as the standard, you are down to $37,400. Your tax at this point is $4687.50. Teacher retirement, at 6% of 50,000, takes you down to $34,400. Your tax at this point is $4237.50. So the $3000 in teacher retirement contribution only cost you $2,550. Neat.
Now teacher retirement is a thing that is super complicated. You mentioned a pension plus a lump sum. Be careful with that. I'm taking the entire thing as a lump sum because I'm dropping out 30 years before I'd be eligible to use any of it, but there's no time frame in my system where the lump sum + annuity makes sense. You either take it all out or leave it all in. If it ends up not being that much money and you're close to proper age, there are usually some very nice services type reasons to stay in.
Anyways, you decide to save more! The 457 is probably cooler than the 403, so lets max that out! 18k contribution limit this year. You can fund that from your liquid savings now by just dumping 100% of the paychecks into this until it is maxed, and using the savings for your expenses.
After $18,000 goes to the 457(b), you are down to $16,400. That 18k in contribution only cost you 15.4k, because your tax burden is down to $1,640.00! Now you want to get nuts! Unfortunately, you don't make enough income to max out the 403(b) as well, but lets dump the whole $16,400 in there and live off savings in taxable accounts. Now you are down to zero income, your tax burden is zero, and so the extra $16,400 only cost you $14,760.00!
I don't know if this helps you or not, but good luck. I didn't include stuff like social security or medicare in the above example, because it makes it a little more complicated. But you get the general idea.
So yea, you can get to not just paying very little in tax, but nothing at all.
