Gov. 457b - Jackpot!

[gripped]

I recently switched jobs from the private sector to a very similar paying job with a public agency. The other day we had an optional meeting to talk to a rep about a 457b plan, which my HR rep described as basically a 401k.

After doing a little bit of research and going to the meeting, I realized that a 457b is about as mustachian as it gets and I accidentally walked into a jackpot! If you aren't familiar, it is a pre-tax plan that has no penalties for withdrawal after you leave service. Withdrawal is taxed like normal income, but I think I'm not unique on these boards in saying that I will likely withdraw in about 2 brackets lower than my current income tax.

All this being said, I think that you sort of have to be in the right place to take advantage of these plans. But if you are considering a government job, do some research on the governmental 457b!

[TheDude]

Yeah if you get a good plan provider they can be pretty sweet. My wife works for a charter school and I think they are finally getting one in 2014. I've been asking for the last year and  a half.

[shamelessHedon]

I had the spouse check last week. Not eligible. :(

[arebelspy]

Yup.  I'm a huge fan, we max ours out.

One caveat is if your employer may go bankrupt, it's risky (such as a non-profit hospital) since it's in their name and is seen as deferred compensation, rather than retirement savings.  Not nearly as much of a risk with a government one.

[Honest Abe]

http://www.millionaireeducator.com/2013/03/how-we-saved-250000-by-taking-crappy.html

Check this guy out... He really knows how to make the most of his 457s

[Rollin]

Been in mine for almost 30 years.  Only drawback are limited funds that have low fees.  Otherwise, it has allowed me to save a significant amount of money, much more than double today due to interest earnings than what I have put in - and that is after the last big drop during 08-09 (as well as one in the 90's).  Overall my yearly percentage increase has been modest, but the way I look at it is I had more money to put in there in the first place (since it was pre-tax it amounted to more available) and it has accrued interest free.  I am planning on retiring early and this no penalty withdrawl may help me if I decide I need it early.  I'll likely take it out and invest in an IRA (roll-over) though.

[aj_yooper]

Yup.  I'm a huge fan, we max ours out.

One caveat is if your employer may go bankrupt, it's risky (such as a non-profit hospital) since it's in their name and is seen as deferred compensation, rather than retirement savings.  Not nearly as much of a risk with a government one.

In some states too, the state never taxes the money when you take it out in retirement.

[arebelspy]

Yup.  I'm a huge fan, we max ours out.

One caveat is if your employer may go bankrupt, it's risky (such as a non-profit hospital) since it's in their name and is seen as deferred compensation, rather than retirement savings.  Not nearly as much of a risk with a government one.

In some states too, the state never taxes the money when you take it out in retirement.

Interesting.  It's a specific exemption in their income tax code?  My state has no income tax anyways, but interesting that some states that do have a personal income tax exclude withdrawals from 457s...

[CommonCents]

Been in mine for almost 30 years.  Only drawback are limited funds that have low fees.  Otherwise, it has allowed me to save a significant amount of money, much more than double today due to interest earnings than what I have put in - and that is after the last big drop during 08-09 (as well as one in the 90's).  Overall my yearly percentage increase has been modest, but the way I look at it is I had more money to put in there in the first place (since it was pre-tax it amounted to more available) and it has accrued interest free.  I am planning on retiring early and this no penalty withdrawl may help me if I decide I need it early.  I'll likely take it out and invest in an IRA (roll-over) though.

Mine lets you sign up for a brokerage account with another firm and send your money to it.  They require you keep a minimum of $1000 with them.  This expands my limited fund options (they have a ton of target retirement ones, but give you little information about those funds).

[Fireman]

+1  I only wish i'd started contributing sooner!