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Emergency funds: $8,000 in i bonds
Tax Filing Status: Single
Tax Rate: 25% Federal, 6.85% State
State of Residence: NY
Desired Asset allocation: 85% stocks / 15% bonds
Desired International allocation: 40% of stocks
Total portfolio: ~$40,000
45% Vanguard Total Stock Market Index Fund Admiral Shares
10% Vanguard Total International Stock Index Fund Investor Shares
5%T. Rowe Price Retirement 2055 Fund (TRRNX) (0.78%)
No Company match
Roth IRA at Vanguard
25% Vanguard Total International Stock Index Fund Admiral Shares
15% Vanguard Total Bond Market Index Fund Investor Shares
I'm a local government employee looking to start seriously contributing to my 457(b). I want to try to max it out for the next couple of years. My first question is whether I should consider putting any money into a roth 457(b) or leave it in traditional. My salary should slowly increase to about $100,000 by the time I retire. If the NY state pension is still there by that time I would get 75% of my final salary (not counting on it.)
The next question is about 457(b) choices. I can either go with T-Rowe Price or Valic.
Potential T-Rowe Price funds:
T. Rowe Price Retirement 2055 .76% TRRNX
T. Rowe Price Equity Index 500 /Large Blend 0.30% Redemption fee - 0.5% on shares held for 90 days or less. PREIX
Potential Valic funds:
Wells Fargo Advantage DJ Target 2055 Instl 0.52% WFQUX
Vanguard Institutional Index Inst 0.04% VINIX
Most of the other options have expense ratios higher than .5%. I was thinking of switching to Valic, going 100% Vanguard Institutional Index, and trying to make up deficiencies with my IRA space. I have heard negative things about Valic and their hidden fees but their site says:
"An annual administrative fee of 0 basis points is charged to Participant accounts or paid by the Plan Sponsor quarterly. This fee is less than the total cost of the services, which is 31 basis points, because it has been offset by the anticipated Indirect Compensation received by VRSCO and affiliates. This fee will change in future years if Indirect Compensation is more or less than was anticipated. VRSCO will pay an annual revenue sharing amount to the Plan Sponsor equal to 4 basis points on the total assets invested in mutual funds at the prior year-end. After the end of each calendar quarter, VRSCO will also pay the Plan Sponsor $1.75 for each Plan Participant with a non-zero balance on the last day of that calendar quarter."
Any thoughts would be appreciates, thanks.
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- Joined: Sat Feb 09, 2013 5:19 pm
Welcome, I'm sure you didn't list all available funds. I'm wondering if TRP offers any small cap, international, and bond funds. Same with Valic. You show the S&P500, but are any complimentary funds and bond funds available?
I like the TRP target retirement funds, but the costs are a drag. Your tax bracket would tend to favor tax-deferred over Roth for contributions.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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- Location: CA
) NY is a relatively low tax state for those who are government employees (Pension not taxed , social security not taxed first 20k from the 457 each year not taxed.Therefore since you can get a state tax deduction now and may not have to pay state tax later a traditional seems best Still one should diversify ones tax obligations and it is lower incomes while working combined with higher incomes in retirement that makes a Roth most appealing, Basically a Roth at some point would be a good idea but it is possible your life will be different in ten years so do the right thing now for this moment in time which seems to be the non-Roth
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