457 Plan: Which provider?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
cyclohexane
Posts: 3
Joined: Wed Jun 24, 2015 5:55 am

457 Plan: Which provider?

Post by cyclohexane » Wed Jun 24, 2015 7:17 am

Hello,

I have been doing some research for my retirement planning and have come to having to make a decision on my provider. I recently got a job with the state and they offer a 457 plan with a small employer match. I have a 401K from my previous employer worth about 30K with Empower. My first question is which of these 5 providers have you had the best experience with or you consider the "best" based on fees or funds. Secondly would it be wise to rollover all of the 30K from the previous 401K. Thank you! :D

Image

NightFall
Posts: 269
Joined: Wed Mar 12, 2014 4:38 pm

Re: 457 Plan: Which provider?

Post by NightFall » Wed Jun 24, 2015 9:30 am

No experience with any of them although I disliked ING with a passion some time ago. They may be different now. I'd pick MassMutal.

Vanguard Tot Bd Mkt Index 0.08%
Vanguard Tot Stock Index 0.05%
International isn't the greatest, but not horrible.

If you prefer a target date fund, TIAA-CREF looks like the right one based on fees.

User avatar
ruralavalon
Posts: 17147
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 457 Plan: Which provider?

Post by ruralavalon » Wed Jun 24, 2015 11:14 am

I would pick Mass Mutual, and use the Vanguard Total Stock Market Index fund and the Vanguard Total Bond Market Index Fund.

The decision about rollover of your old 401k depends primarily on whether it offers better funds than the new 457. What are the 3-4 lowest ER funds offered in the old 401k?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
cyclohexane
Posts: 3
Joined: Wed Jun 24, 2015 5:55 am

Re: 457 Plan: Which provider?

Post by cyclohexane » Wed Jun 24, 2015 12:15 pm

ruralavalon wrote:The decision about rollover of your old 401k depends primarily on whether it offers better funds than the new 457. What are the 3-4 lowest ER funds offered in the old 401k?
I'm relatively new to this so I apologize if I don't answer your question exactly. I let my previous employer's 401k people deal with my selections, but I'm feeling like I want to take a bit more hands-on approach now. Here is a picture of the expense ratios that all of my funds are in (I think?).

Image

The main reason for thinking of rolling over the entirety of the 401K is (1) compound interest with more money initially and (2) my 457 account has no age limitation on cash distributions at retirement. My employer also chips in $75 every paycheck, so free money is good money for me. :moneybag :sharebeer

User avatar
SkierMom
Posts: 230
Joined: Thu Nov 29, 2012 8:53 pm
Location: Northern CAli

Re: 457 Plan: Which provider?

Post by SkierMom » Wed Jun 24, 2015 1:13 pm

I do not believe you can rollover an IRA into a 457. The 457 plan has different set of guidelines than an IRA (i.e. you can access funds upon separation of employer without penalty if you are younger than 59 1/2 years.) since the 457 were set up for government employees that may have to access money prior to a pension kicking in.

I would keep my IRA in a low-cost provider (Vanguard, Schwab, Fidelity) separate from my former employer.

I like the TIAA or MM option. Mass Mutual has great low cost offerings.

Do you know if there are any Employer Administrative Fees that are tacked onto the Expense Ratios?

sawhorse
Posts: 3488
Joined: Sun Mar 01, 2015 7:05 pm

Re: 457 Plan: Which provider?

Post by sawhorse » Wed Jun 24, 2015 2:38 pm

SkierMom wrote:I do not believe you can rollover an IRA into a 457. The 457 plan has different set of guidelines than an IRA (i.e. you can access funds upon separation of employer without penalty if you are younger than 59 1/2 years.) since the 457 were set up for government employees that may have to access money prior to a pension kicking in.
My former state 457 plan allowed rollovers of traditional IRAs but not Roth IRAs. The rolled IRA was kept in a separate subaccount that would trigger the 10% early distribution penalty for separated employees whereas the rest of the 457 would not trigger the penalty. It was the same for 401k rollovers. That money was kept in a separate subaccount. The advisor said it was an unusual privilege for a 457 to offer.

So in terms of your 401k decision, find out if it would be kept in a separate subaccount that would trigger the 10% penalty. Are you satisfied with your 401k options? If so, I would consider leaving them there in order to take advantage of the legal protections provided by ERISA such as protection against civil lawsuits. Your 457 is not ERISA.

Is this Iowa? The Iowa site says you can transfer between providers, so if you're unhappy or the expense ratios change, that's an option. Are you allowed to contribute to more than one provider at a time?

User avatar
ruralavalon
Posts: 17147
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 457 Plan: Which provider?

Post by ruralavalon » Wed Jun 24, 2015 4:27 pm

Your old 401k has several very good funds offered, including:
BlackRock S&P 500 Stock Fund. ER 0.04%
American Funds EuroPacific Growth R6 ER 0.49%
BlackRock Bond Index K ER 0.06%

The funds offered are as good as those offered in your 457, so I would not transfer it into your 457.

What funds are your currently using in your old 401k?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
cyclohexane
Posts: 3
Joined: Wed Jun 24, 2015 5:55 am

Re: 457 Plan: Which provider?

Post by cyclohexane » Wed Jun 24, 2015 7:59 pm

NightFall wrote: If you prefer a target date fund, TIAA-CREF looks like the right one based on fees.
I'm not sure with my age (30) that I want to do target date funds, but thank you for the reply. 25-30 years from now seems like so far away for retiring.
SkierMom wrote:Do you know if there are any Employer Administrative Fees that are tacked onto the Expense Ratios?
I don't know this right now, but I am looking to meet with representatives of a few of the providers to also see what sort of agent I am dealing with. Good question to ask.
sawhorse wrote:find out if it would be kept in a separate subaccount that would trigger the 10% penalty. Are you satisfied with your 401k options? If so, I would consider leaving them there in order to take advantage of the legal protections provided by ERISA such as protection against civil lawsuits. Your 457 is not ERISA.

Is this Iowa? The Iowa site says you can transfer between providers, so if you're unhappy or the expense ratios change, that's an option. Are you allowed to contribute to more than one provider at a time?
Great info! I will ask the representatives about this possible subaccount. I am somewhat satisfied (it seems to make money without me being able to contribute to it from my payroll or spend much time with it, it seems like a Vanguard fund might probably do the same), but I'd like to take advantage of my current employer's somewhat matching of what I would have taken out of my payroll. Right now they only put $75 in as long as I put $75 or more into the 457 per paycheck. I also can't put money into that old 401K with my current payroll, but the ERISA is an interesting point I am researching now. This is Iowa and from what I read I do not think you can, but I will ask this.
ruralavalon wrote: The funds offered are as good as those offered in your 457, so I would not transfer it into your 457.
If they are just as good, why not use the initial rollover of 30K to help boost with compound interest and add in the "free" money my employer will give me every paycheck for having the account? I admit to being a layman on investing, so I am hope I am being somewhat clear in my issues.

User avatar
ruralavalon
Posts: 17147
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 457 Plan: Which provider?

Post by ruralavalon » Thu Jun 25, 2015 9:55 am

cyclohexane wrote: . . . I'd like to take advantage of my current employer's somewhat matching of what I would have taken out of my payroll. Right now they only put $75 in as long as I put $75 or more into the 457 per paycheck. . . .
ruralavalon wrote: The funds offered [in your old 401k] are as good as those offered in your 457, so I would not transfer it into your 457.
If they are just as good, why not use the initial rollover of 30K to help boost with compound interest and add in the "free" money my employer will give me every paycheck for having the account? I admit to being a layman on investing, so I am hope I am being somewhat clear in my issues.
There is no compounding advantage since the expense ratios are as low in the old 401k as they are in your new 457. The $30k in investments will compound tax-deferred in your old 401k, just as well as they would compound in your new 457.

You should contribute from your pay to the new 457 to get the employer match. In fact contribute more than is needed to get the employer match. The fund choices offered in your 457 are very good, and it's a great advantage to have automatic payroll deductions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Post Reply