Anyone here contribute to a 457 retirement plan?

[Scarpozzi]

I've posted a little about retirement planning and seen a few other people post about it. 457 accounts are available from employers that have them. It's more common from government employers and is considered to be an "Income Deferral" Retirement Plan.... It's a tax sheltered account, like a 401k and the limits follow the same as 401k/403b. My understanding is that you can invest in a 457 alongside a 401k and maximize contributions to both. It would be a way to avoid taxes on up to $19,500 X 2 if you maxed both ($39k).

The biggest disadvantage is similar to disadvantages of 401ks. They're managed through companies that push funds that tend to have higher fee structures. Your options aren't all that great either (low selection)...and investing in both may make it more difficult to diversify if they push similar funds in both.

The biggest advantage of 457 is that you can withdraw without penalty before 59 1/2...and you get the tax savings now if you don't elect Roth.

Ok....thoughts?

 

[Fritzo]

I have a .357 retirement plan.

I plan to point a .357 at people that have money.

 

[pete6032]

I've posted a little about retirement planning and seen a few other people post about it. 457 accounts are available from employers that have them. It's more common from government employers and is considered to be an "Income Deferral" Retirement Plan.... It's a tax sheltered account, like a 401k and the limits follow the same as 401k/403b. My understanding is that you can invest in a 457 alongside a 401k and maximize contributions to both. It would be a way to avoid taxes on up to $19,500 X 2 if you maxed both ($39k).

The biggest disadvantage is similar to disadvantages of 401ks. They're managed through companies that push funds that tend to have higher fee structures. Your options aren't all that great either (low selection)...and investing in both may make it more difficult to diversify if they push similar funds in both.

The biggest advantage of 457 is that you can withdraw without penalty before 59 1/2...and you get the tax savings now if you don't elect Roth.

Ok....thoughts?

Thoughts on what exactly? Do you have both options?

 

[Scarpozzi]

Thoughts on what exactly? Do you have both options?

I think I do. I haven't tried to open a 457, but think it's as easy as setting up the deduction from my check through the retirement website.

My employer has an old-school pension, but I didn't opt-in. Instead, I have another retirement account that I manage elected investments in.

Additionally, I have a 401k account, but don't max it, but looking at doing what I can so I can get out sooner.

 

[brianmanahan]

i wish, would love to be able to do 38$k pretax per year

 

[Scarpozzi]

i wish, would love to be able to do 38$k pretax per year

Me too. I wouldn't be able to do that, but trying to figure out what I can afford to do without sacrificing fun too much now. I was just thinking....even saving $50k over the course of 5 years will be $150k by the time I retire. That would continue to grow interest and would last me probably 4 years....or one really good weekend.

 

[purbeast0]

Damn I wish I could do that for myself but we don't have that option. However with me maxing out my 401k contribution and my employee contribution to my 401k I am banking about $40k/yr into my 401k. Just started with this company this year so if I stick with them for a long time, that will be some nice bank.

 

[Spacehead]

Never heard of this till now.
Sadly, my employer now offers nothing for a retirement plan. Everyone wants low deductibles on our health plan so any sort of HSA is out of the question.
I wish there were options for working people that have their own retirement plan other than the (this year) 7K limit, as far as tax savings.

 

[Greenman]

Ironically, that's about how much is in my retirement plan.

 

[Scarpozzi]

Ironically, that's about how much is in my retirement plan.

A lot of people that retire end up with health problems. It's better staying active, unless you just hate your job.

The main things I want to do in retirement are construction and restoration projects along with sailing/fishing/homebrew/etc.... That stuff is all fairly cheap and I'm going to work on setting up another workshop for those projects...maybe even a drydock for boat restoration. (Ok....garage)

 

[s0me0nesmind1]

i wish, would love to be able to do 38$k pretax per year

Marry a wife

Also, invest in an HSA and do ROTH IRA.

 

[s0me0nesmind1]

Your chances of an employer offering both somehow I would think is virtually close to zero. If you are lucky enough, congrats and go for it.

Personally though as a tax man, I would invest in an HSA first and foremost. I would also weigh the pros and cons and consider diversifying with a ROTH IRA. It is entirely a tossup as to if tax rates will be higher now or higher later when you r I would venture to say it will be higher later, so it's good to diversify.

 

[brianmanahan]

Marry a wife

i would! but nobody's quite that desperate though

Also, invest in an HSA and do ROTH IRA.

no HSA available, health insurance deductible too low

but luckily i can do the roth IRA with the mega backdoor trick to make up for things somewhat

 

[s0me0nesmind1]

i would! but nobody's quite that desperate though



no HSA available, health insurance deductible too low

but luckily i can do the roth IRA with the mega backdoor trick to make up for things somewhat

I'm just surprised your employers don't give you options to have a high deductible? Every employer I've had tends to give me at least 3 options.... When I was with Big4 they were offering as much as 5-6 different plans with different providers as well.

Had I known the advantages I would have gone high deductible a loooong time ago.

 

[brianmanahan]

I'm just surprised your employers don't give you options to have a high deductible?

yeah it's weird, i think they might next year though

in which case i'll almost certainly take that option

 

[skyking]

we can't, as she has a 401k through work and I have a pension. We will be maxing our Roths for the next few years.

 

[Greenman]

A lot of people that retire end up with health problems. It's better staying active, unless you just hate your job.

The main things I want to do in retirement are construction and restoration projects along with sailing/fishing/homebrew/etc.... That stuff is all fairly cheap and I'm going to work on setting up another workshop for those projects...maybe even a drydock for boat restoration. (Ok....garage)

I do construction now, as my business and on my house. But i'm thinking of opening a small cabinet shop when I retire, it's what I know, and I enjoy using quality tools. The table saw I'm looking at for the future shop is around $4k. Nice tool.

 

[skyking]

Nothing like a good heavy cast iron table saw. Are you thinking a saw stop? I have a grizzly 1023 right tilt. Would love a left tilt saw.

 

[Scarpozzi]

I'm just surprised your employers don't give you options to have a high deductible? Every employer I've had tends to give me at least 3 options.... When I was with Big4 they were offering as much as 5-6 different plans with different providers as well.

Had I known the advantages I would have gone high deductible a loooong time ago.

I dropped my insurance through work and am on my wife's health insurance..... My work's insurance is really good, but my deductible was maybe $500. Hers is $10k. The difference is that my family plan was over $4k in premiums annually and her premiums are covered by her employer...so we're banking that $4k and putting it toward debt/savings.

 

[Scarpozzi]

I do construction now, as my business and on my house. But i'm thinking of opening a small cabinet shop when I retire, it's what I know, and I enjoy using quality tools. The table saw I'm looking at for the future shop is around $4k. Nice tool.

I've got a DeWalt DW745 jobsite table saw. The main reason I like it? Because I can move it out to my driveway and keep the sawdust somewhere that I can get rid of it easily (leaf blower). I do realize you're talking about a whole different thing. My dad's got a Shop Smith we're going to try to fix up, if I can find him a replacement motor. Hoping we can get the lathe working again on that thing.

 

[skyking]

we're stuck with my insurance through my union, and my wife would get very little if she dropped her work provided coverage. It has been a great deal for us, when times have been slow for me I can get on her plan for ~$200 a month. I think we have done that twice in 25 years.

 

[Fritzo]

A lot of people that retire end up with health problems. It's better staying active, unless you just hate your job.

The main things I want to do in retirement are construction and restoration projects along with sailing/fishing/homebrew/etc.... That stuff is all fairly cheap and I'm going to work on setting up another workshop for those projects...maybe even a drydock for boat restoration. (Ok....garage)

I've been blessed to have jobs with retirement accounts (that the company matched contributions to) for the last 25 years, but I can see how health issues can eat away at your money as you get older. My parents grew up on country cookin' their whole lives and it shows- they're both overweight, inactive, and have to take a cereal bowl full of pills every day.

I'm not falling down that hole. I work out 3-4 days a week, don't eat processed food, have never smoked or taken any kind of illegal drug, and only drink socially. As a result, I'll be 50 next month and the only medication I'm on are from genetic issues (chronic GERD treated with omeprazole, and buspirone for anxiety problems). I recently had an echocardiogram of my heart due to some heart palpitations, but that turned out to be due to acid reflux. Other than that, the report says I have the physiological age of a 35 year old.

The point- I want to retire in my 60's and enjoy life. I've worked my entire life starting at 14 and have a nice Social Security check and a decent retirement savings. I want to wander around Europe instead of doctor's offices. You have to plant the seeds for what you eventually want to do in your "freedom years" NOW.

 

[Exterous]

I've posted a little about retirement planning and seen a few other people post about it. 457 accounts are available from employers that have them. It's more common from government employers and is considered to be an "Income Deferral" Retirement Plan.... It's a tax sheltered account, like a 401k and the limits follow the same as 401k/403b. My understanding is that you can invest in a 457 alongside a 401k and maximize contributions to both. It would be a way to avoid taxes on up to $19,500 X 2 if you maxed both ($39k).

The biggest disadvantage is similar to disadvantages of 401ks. They're managed through companies that push funds that tend to have higher fee structures. Your options aren't all that great either (low selection)...and investing in both may make it more difficult to diversify if they push similar funds in both.

The biggest advantage of 457 is that you can withdraw without penalty before 59 1/2...and you get the tax savings now if you don't elect Roth.

Ok....thoughts?

I contribute to a 457 plan and you are correct that it is a separate $19,500 that you can contribute to. You are also correct that you can withdraw from it before 59.5 without penalty from an IRS perspective. Your employer may have their own limitations. For example I cannot draw from mine as long as I am any sort of W-2 employee for the company.

I would also be cautious about your listed disadvantages as which investment companies you can use is also up to the employer. My employer offers most if not all of the funds that Fidelity has to offer - I have 192 options to pick from. Fidelity provides access to other firms so Vanguard Institutional shares like VSMPX with an ER of 0.02% are available. The weighted average of expense ratio fees that I pay for my selected index funds in my 457b is 0.03%

 

[Scarpozzi]

I contribute to a 457 plan and you are correct that it is a separate $19,500 that you can contribute to. You are also correct that you can withdraw from it before 59.5 without penalty from an IRS perspective. Your employer may have their own limitations. For example I cannot draw from mine as long as I am any sort of W-2 employee for the company.

I would also be cautious about your listed disadvantages as which investment companies you can use is also up to the employer. My employer offers most if not all of the funds that Fidelity has to offer - I have 192 options to pick from. Fidelity provides access to other firms so Vanguard Institutional shares like VSMPX with an ER of 0.02% are available. The weighted average of expense ratio fees that I pay for my selected index funds in my 457b is 0.03%

That's a good selection if you have 192.

There used to be more options in mine (maybe 30-40 including bonds/money markets), but my understanding is that a lot of these retirement companies started going with more managed approaches and offering target funds. (Retirement Target 2030, Retirement Target 2040, etc)... The automatically shift from higher risk to things that are more risk averse closer to the target date. Those funds come with higher fee structures and when they were added to the available plans, we lost some ING/Vangard/Fidelity Options through the particular company I'm with (this was maybe 10-11 years ago.