Author Topic: Swap around contribution amounts to increase flexibility.  (Read 1684 times)

MrsPotts

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Swap around contribution amounts to increase flexibility.
« on: August 17, 2014, 03:56:00 PM »
I am 53 and a public employee.  I make about 80K (+/- 2 K)depending on extra projects. 

I have a combination defined benefit (.01 x highest salary x years of employment, which will be 38 years if I retire at 65) and defined contribution pension.  I currently put 8% of salary, pretax into that defined contribution account, which is sitting at $310k.   I also put $600 a month into an optional pretax 457 (150 K) account.  Both accounts are low fee, balanced, primarily index stocks and bonds.  Dh, who is a teacher and a bit older than me, has a traditional defined benefit pension and an identical 457. 

Our pension rules change in January 2015; whereas before we could alter our defined contribution amount to 5,8,10, or 15% every year, we now will be "stuck" with whatever our rate is in January, 2015, until we separate from employment.   I am thinking maybe I want to drop my pension contributions to the lowest possible rate, and make up for it with an increased DCP contribution, in order to maintain some flexibility, but I am not sure of the pros and cons.   Thoughts?

aclarridge

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Re: Swap around contribution amounts to increase flexibility.
« Reply #1 on: August 18, 2014, 09:00:13 AM »
I currently put 8% of salary, pretax into that defined contribution account, which is sitting at $310k.   I also put $600 a month into an optional pretax 457 (150 K) account.
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I am thinking maybe I want to drop my pension contributions to the lowest possible rate, and make up for it with an increased DCP contribution, in order to maintain some flexibility, but I am not sure of the pros and cons.

Am I correct in assuming you want to put less into the 457 and more into the defined contribution pension? Just wanted to make your question a bit clearer.

I am pretty clueless on US taxation but I think it would help to state what your goals are, like when would you like to retire, and how much income do you require.

arebelspy

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Re: Swap around contribution amounts to increase flexibility.
« Reply #2 on: August 31, 2014, 04:06:11 PM »
Our pension rules change in January 2015; whereas before we could alter our defined contribution amount to 5,8,10, or 15% every year, we now will be "stuck" with whatever our rate is in January, 2015, until we separate from employment.   I am thinking maybe I want to drop my pension contributions to the lowest possible rate, and make up for it with an increased DCP contribution, in order to maintain some flexibility, but I am not sure of the pros and cons.   Thoughts?

In the absence of more specific numbers/information, I'm of the opinion that more flexibility and more control is better.  You'll probably have to wait for certain ages for the pension, whereas the 457 is any age after separating employment.  I'd max the 457, and set the pension contribution to whatever you can afford after doing that.
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