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403b or 457?

 
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kdmusic



Joined: 08 Apr 2008
Posts: 126
PostPosted: Wed Nov 04, 2009 11:51 pm    Post subject: 403b or 457? Reply with quote
I have been maxing out both my 457 and 403b for the past two years. Starting in january, this will no longer be possible if I want to also pay rent and eat. Both of the tax-deferred spaces have identical fund choices: fidelity spartans, one dfa fund, a few vanguard funds among others. Good expense ratios etc.

So: I can max one (15,500) and dump the other (0), or split evenly or... What would you do? I'm thinking of just stopping all contributions to the 457.

thanks,

kdm
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schnoodlemom



Joined: 20 Oct 2008
Posts: 154
PostPosted: Thu Nov 05, 2009 7:09 am    Post subject: Reply with quote
We were in the same situation this past year, but our 403b and 457b were vastly different. We just stopped our contributions to the 457b, we still max out 403b and 2 ROTHS. Our 457b had a very limited number of American funds in it, was complicated to track or change allocations and on reading the fine print was "owned" by the employer. Our 403b was the exact opposite and all in Fidelity funds. I would think the simpler the better whichever that ends up being for you. You might want to figure out how to best maintain your asset allocation through rebalancing, new contributions etc. Amanda
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House Blend



Joined: 04 May 2007
Posts: 479
PostPosted: Thu Nov 05, 2009 10:04 am    Post subject: Re: 403b or 457? Reply with quote
kdmusic wrote:
I have been maxing out both my 457 and 403b for the past two years. Starting in january, this will no longer be possible if I want to also pay rent and eat. Both of the tax-deferred spaces have identical fund choices: fidelity spartans, one dfa fund, a few vanguard funds among others. Good expense ratios etc.

So: I can max one (15,500) and dump the other (0), or split evenly or... What would you do? I'm thinking of just stopping all contributions to the 457.


I don't think the differences are huge. WIth the 403(b): you can make penalty-free withdrawals or rollovers after age 59.5, whether or not you are retired. (If your employer allows it.) With the 457(b), you can make penalty-free withdrawals if you are retired, even before 59.5.

The relative value of these two options depends on your circumstances.

Another thought: do you have any taxable investments? Consider the possibility of continuing to max out both plans, and spending down the taxable account. This has the effect of sheltering more of your portfolio from tax.
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