pension, 403b, 457 questions

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Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 9:30 am

My wife is an employee at a public university in Florida. She chose to sign up for the pension plan and has been contributing for 4 years.

In addition, she has the following retirement choices:

Tax-Deferred 403(b)
After-tax Roth 403(b)
457 Deferred Plan

She is currently putting 10% in the Tax-Deferred 403(b).

Last year's tax rate for us , MFJ , was 28%. We hit the income limits for contributing to our personal VG Roth IRAs in past 2 years.

I max out my 401K.

If we had more $$ available should my wife put more in the Tax-Deferred 403(b), After-tax Roth 403(b) or 457? If we can't fully fund the tax deferred accounts, should she split funds between both...say, 10% in 403b, 10% in 457? At our tax rate, does it make sense to contribute to any Roth plan?

Any recommendations on splitting contributions between the available plans is welcome.

Thanks for any help!

CountOnIt
Posts: 20
Joined: Thu Jun 14, 2018 12:51 pm

Re: pension, 403b, 457 questions

Post by CountOnIt » Wed Jun 19, 2019 10:00 am

Is there a reason why she is contributing to the 403(b) rather than the 457? Is she making a conscious decision here (better investment options, employer match, other reason?) or did she just pick the 403(b) because it is more common? My understanding is that, while both are tax-deferred, the 457 is more accessible after you leave your place of employment (i.e. no age requirement).

Without having a full picture, my hunch is that she should utilize some mix of the 457 and the Roth 403(b).

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 10:06 am

CountOnIt wrote:
Wed Jun 19, 2019 10:00 am
Is there a reason why she is contributing to the 403(b) rather than the 457? Is she making a conscious decision here (better investment options, employer match, other reason?) or did she just pick the 403(b) because it is more common? My understanding is that, while both are tax-deferred, the 457 is more accessible after you leave your place of employment (i.e. no age requirement).

Without having a full picture, my hunch is that she should utilize some mix of the 457 and the Roth 403(b).
Thanks. Not sure exactly what our thought process was at the time. The 403b provider we selected was Fidelity, where she already had an account. I think we chose the 403b because Fidelity offered some low cost options.

The 457 providers are : nationwide, empower, valic, voya, trowe and schwab.

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CyclingDuo
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Re: pension, 403b, 457 questions

Post by CyclingDuo » Wed Jun 19, 2019 10:58 am

finfire wrote:
Wed Jun 19, 2019 9:30 am
My wife is an employee at a public university in Florida. She chose to sign up for the pension plan and has been contributing for 4 years.

In addition, she has the following retirement choices:

Tax-Deferred 403(b)
After-tax Roth 403(b)
457 Deferred Plan

She is currently putting 10% in the Tax-Deferred 403(b).

Last year's tax rate for us , MFJ , was 28%. We hit the income limits for contributing to our personal VG Roth IRAs in past 2 years.

I max out my 401K.

If we had more $$ available should my wife put more in the Tax-Deferred 403(b), After-tax Roth 403(b) or 457? If we can't fully fund the tax deferred accounts, should she split funds between both...say, 10% in 403b, 10% in 457? At our tax rate, does it make sense to contribute to any Roth plan?

Any recommendations on splitting contributions between the available plans is welcome.

Thanks for any help!
Is there enough salary left for your wife to max out her 403b and still meet all of your household expenses? If so, is there enough leftover to also fill the 457b and still meet all of your household expenses?

If you max out your 401k, and she maxes out both her 403b and 457b, does that get your MAGI low enough to qualify for Roth IRA's? Your MAGI would have to be under $193K for MFJ to contribute the full amount into Roth IRA's, and you could still contribute partial amounts to your Roth IRA's if your MAGI was $193k-$203K. What would your taxes be if you both maxed out one plan each? That would be $38K in pre-tax contributions. What would it be if you maxed out all three? That would be $57K in pre-tax contributions.

Obviously, having enough salary between the two of you to do this and still have enough leftover to meet all household expenses plus fund the Roth IRA's is key to doing it.

You didn't mention your ages, but that would be $19K for you, $19K for her + the potential additional $19K for the second plan, $6K for your Roth IRA and $6K for her Roth IRA. Grand total would be $69,000 going to those saving vehicles.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 11:09 am

CyclingDuo wrote:
Wed Jun 19, 2019 10:58 am
finfire wrote:
Wed Jun 19, 2019 9:30 am
My wife is an employee at a public university in Florida. She chose to sign up for the pension plan and has been contributing for 4 years.

In addition, she has the following retirement choices:

Tax-Deferred 403(b)
After-tax Roth 403(b)
457 Deferred Plan

She is currently putting 10% in the Tax-Deferred 403(b).

Last year's tax rate for us , MFJ , was 28%. We hit the income limits for contributing to our personal VG Roth IRAs in past 2 years.

I max out my 401K.

If we had more $$ available should my wife put more in the Tax-Deferred 403(b), After-tax Roth 403(b) or 457? If we can't fully fund the tax deferred accounts, should she split funds between both...say, 10% in 403b, 10% in 457? At our tax rate, does it make sense to contribute to any Roth plan?

Any recommendations on splitting contributions between the available plans is welcome.

Thanks for any help!
Is there enough salary left for your wife to max out her 403b and still meet all of your household expenses? If so, is there enough leftover to also fill the 457b and still meet all of your household expenses?

If you max out your 401k, and she maxes out both her 403b and 457b, does that get your MAGI low enough to qualify for Roth IRA's? Your MAGI would have to be under $193K for MFJ to contribute the full amount into Roth IRA's, and you could still contribute partial amounts to your Roth IRA's if your MAGI was $193k-$203K. What would your taxes be if you both maxed out one plan each? That would be $38K in pre-tax contributions. What would it be if you maxed out all three? That would be $57K in pre-tax contributions.

Obviously, having enough salary between the two of you to do this and still have enough leftover to meet all household expenses plus fund the Roth IRA's is key to doing it.

You didn't mention your ages, but that would be $19K for you, $19K for her + the potential additional $19K for the second plan, $6K for your Roth IRA and $6K for her Roth IRA. Grand total would be $69,000 going to those saving vehicles.
We are 45/43 years old.

Yes, I think our MAGI would get low enough to contribute to Roth IRAs if we funded both her 403b and 457. Last year we were just over the income limit by a few k.

Can we afford it? That is what I am trying to figure out. Definitely not all 3. We could probably afford maxing the 403b and 457 if we suspended contributing to VG 529. We contribute 1K/month currently, for 2 kids, 5 and 7....it's just difficult to stop contributing to that. I don't think there'd be much left over for the roth iras after that.

Ron Ronnerson
Posts: 1139
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: pension, 403b, 457 questions

Post by Ron Ronnerson » Wed Jun 19, 2019 12:37 pm

Personally, this is what I would do in your situation:
1) Reduce (or stop) contributions to the 529
2) Max out traditional accounts since you’re paying 28% in taxes. If investment options are comparable, I’d prioritize the 457b over the 403b since it offers the ability to access the account if/when she separates from her employer regardless of age.
3) See if there is a way to cut expenses anywhere so that you can contribute something toward a Roth IRA account as well.
4) Use cash flow and retirement accounts to pay for college expenses rather than a 529. You can access Roth IRA contributions (but not the growth) at any age. The 457b would be accessible if your wife has separated from her employer. In any case, at age 59.5, you can access your retirement accounts without penalty.

The exact ages of all family members when you need to access funds for education may be something to consider when deciding which type of account(s) to use to save for college. For example, my wife and I both turn 45 this year and our daughter turned 5 recently. We’ve enrolled our daughter into Transitional Kindergarten for the next school year so she won’t start kindergarten until age 6. That means, she’ll be ready to start college at age 19. We will be age 59 by then. We can use our Roth IRA contributions to pay for the 1st year of school and then will be old enough to access other retirement accounts as well. This way, we maintain flexibility while also reducing our current tax burden. We don’t have a 529. I’m a public-school teacher (maxing out a 457b and 403b and also contributing 10% toward a pension) and my spouse is a stay-at-home parent. I make six-figures but we are in the 12% federal tax bracket (and have a 0% effective rate for California income taxes). Many people prefer to put something into a 529 even though they haven’t maximized their own retirement space. Decide if that really is the best decision for your exact situation.

CountOnIt
Posts: 20
Joined: Thu Jun 14, 2018 12:51 pm

Re: pension, 403b, 457 questions

Post by CountOnIt » Wed Jun 19, 2019 12:39 pm

finfire wrote:
Wed Jun 19, 2019 9:30 am
Any recommendations on splitting contributions between the available plans is welcome.
Unless there are matching funds in a 403b, I would place tax-deferred dollars in the 457. I'm guessing your trowe option has access to "EQUITY INDEX TRUST CLASS C," with a 0.06% expense ratio. That is probably a pretty good option.

If you are Florida residents, I doubt the 529 is providing you with benefits that are really above and beyond your retirement vehicles. Yes, they serve different purposes, but if I were in your shoes, I would work on the retirement accounts first. You can tap the 457 for college funds if your wife leaves her employer - or if she is still working, you can reduce future contributions to free up the funds to pay for the college expenses. That said, I understand if you enjoy having funds that are distinctly set aside for your children's education - just know that you are removing some of your options that you could have otherwise retained.

For any ROTH contributions you decide to make:
1) If you do NOT have existing traditional IRA's: I would make Roth IRA contributions (either direct, or back-door if required). You will likely have better investment options than in your 403(b)/401(k)'s.

2) If you DO have existing traditional IRA's: These balances make it more difficult (taxing) to make backdoor Roth Contributions (search for additional information if you are not familiar on this). Even if you don't need to make a backdoor Roth contribution this year, I would recommend rolling these funds over into a Roth when practical. So, for example, instead of contributing $12K to Roth IRA's, contribute that $12K to your tax deferred 457/403(b)/401(k) and then roll-over $12K of your traditional IRA into a Roth. The net-effect is essentially the same as contributing $12K into a Roth, but this approach helps you flush out the traditional IRA funds.

After you fill up the 457 and IRA's, then move on to the 401k/403b. The mix between Roth and tax-deferred is something that, ultimately, only you can decide. Just know that in general, you will probably want some of both. While avoiding the 28% tax rate is nice, we don't know what tax rates will do 10-20 years + into the future. Additionally, having the Roth funds will provide some flexibility in accessing your money in retirement. Large withdrawals from traditional tax -deferred retirement funds may throw off your ability to obtain healthcare subsidies or negatively impact your social security payments in the future.

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 12:42 pm

Ron Ronnerson wrote:
Wed Jun 19, 2019 12:37 pm
Personally, this is what I would do in your situation:
1) Reduce (or stop) contributions to the 529
2) Max out traditional accounts since you’re paying 28% in taxes. If investment options are comparable, I’d prioritize the 457b over the 403b since it offers the ability to access the account if/when she separates from her employer regardless of age.
3) See if there is a way to cut expenses anywhere so that you can contribute something toward a Roth IRA account as well.
4) Use cash flow and retirement accounts to pay for college expenses rather than a 529. You can access Roth IRA contributions (but not the growth) at any age. The 457b would be accessible if your wife has separated from her employer. In any case, at age 59.5, you can access your retirement accounts without penalty.

The exact ages of all family members when you need to access funds for education may be something to consider when deciding which type of account(s) to use to save for college. For example, my wife and I both turn 45 this year and our daughter turned 5 recently. We’ve enrolled our daughter into Transitional Kindergarten for the next school year so she won’t start kindergarten until age 6. That means, she’ll be ready to start college at age 19. We will be age 59 by then. We can use our Roth IRA contributions to pay for the 1st year of school and then will be old enough to access other retirement accounts as well. This way, we maintain flexibility while also reducing our current tax burden. We don’t have a 529. I’m a public-school teacher (maxing out a 457b and 403b and also contributing 10% toward a pension) and my spouse is a stay-at-home parent. I make six-figures but we are in the 12% federal tax bracket (and have a 0% effective rate for California income taxes). Many people prefer to put something into a 529 even though they haven’t maximized their own retirement space. Decide if that really is the best decision for your exact situation.
Thank you, Ron. This is great information.

Is there a recommended calculator online to show the affects on one's tax rate after increasing/decreasing deferred contributions? I'll research, but if anyone has a online tool they'd recommend, let me know.

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 1:04 pm

CountOnIt wrote:
Wed Jun 19, 2019 12:39 pm
finfire wrote:
Wed Jun 19, 2019 9:30 am
Any recommendations on splitting contributions between the available plans is welcome.
Unless there are matching funds in a 403b, I would place tax-deferred dollars in the 457. I'm guessing your trowe option has access to "EQUITY INDEX TRUST CLASS C," with a 0.06% expense ratio. That is probably a pretty good option.

If you are Florida residents, I doubt the 529 is providing you with benefits that are really above and beyond your retirement vehicles. Yes, they serve different purposes, but if I were in your shoes, I would work on the retirement accounts first. You can tap the 457 for college funds if your wife leaves her employer - or if she is still working, you can reduce future contributions to free up the funds to pay for the college expenses. That said, I understand if you enjoy having funds that are distinctly set aside for your children's education - just know that you are removing some of your options that you could have otherwise retained.

For any ROTH contributions you decide to make:
1) If you do NOT have existing traditional IRA's: I would make Roth IRA contributions (either direct, or back-door if required). You will likely have better investment options than in your 403(b)/401(k)'s.

2) If you DO have existing traditional IRA's: These balances make it more difficult (taxing) to make backdoor Roth Contributions (search for additional information if you are not familiar on this). Even if you don't need to make a backdoor Roth contribution this year, I would recommend rolling these funds over into a Roth when practical. So, for example, instead of contributing $12K to Roth IRA's, contribute that $12K to your tax deferred 457/403(b)/401(k) and then roll-over $12K of your traditional IRA into a Roth. The net-effect is essentially the same as contributing $12K into a Roth, but this approach helps you flush out the traditional IRA funds.

After you fill up the 457 and IRA's, then move on to the 401k/403b. The mix between Roth and tax-deferred is something that, ultimately, only you can decide. Just know that in general, you will probably want some of both. While avoiding the 28% tax rate is nice, we don't know what tax rates will do 10-20 years + into the future. Additionally, having the Roth funds will provide some flexibility in accessing your money in retirement. Large withdrawals from traditional tax -deferred retirement funds may throw off your ability to obtain healthcare subsidies or negatively impact your social security payments in the future.
Thank you.

The trowe has an equity index trust, at .06%. I will def look into this!

Only I have a traditional IRA (in VG). It is an IRA where I placed all my old 401ks in. Is this the existing traditional IRA you are referring to? I do not contribute to it..it simply holds my old tax deferred money. I don't think I can contribute a tax deferred amount , if I am already contributing to a 401K...am I wrong about that?

If I can lower my taxes via tax deferred, I'd be happier to contribute to Roths..but it may be wise to consider a smaller contribution via back door.

Ron Ronnerson
Posts: 1139
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: pension, 403b, 457 questions

Post by Ron Ronnerson » Wed Jun 19, 2019 1:24 pm

finfire wrote:
Wed Jun 19, 2019 12:42 pm
Ron Ronnerson wrote:
Wed Jun 19, 2019 12:37 pm
Personally, this is what I would do in your situation:
1) Reduce (or stop) contributions to the 529
2) Max out traditional accounts since you’re paying 28% in taxes. If investment options are comparable, I’d prioritize the 457b over the 403b since it offers the ability to access the account if/when she separates from her employer regardless of age.
3) See if there is a way to cut expenses anywhere so that you can contribute something toward a Roth IRA account as well.
4) Use cash flow and retirement accounts to pay for college expenses rather than a 529. You can access Roth IRA contributions (but not the growth) at any age. The 457b would be accessible if your wife has separated from her employer. In any case, at age 59.5, you can access your retirement accounts without penalty.

The exact ages of all family members when you need to access funds for education may be something to consider when deciding which type of account(s) to use to save for college. For example, my wife and I both turn 45 this year and our daughter turned 5 recently. We’ve enrolled our daughter into Transitional Kindergarten for the next school year so she won’t start kindergarten until age 6. That means, she’ll be ready to start college at age 19. We will be age 59 by then. We can use our Roth IRA contributions to pay for the 1st year of school and then will be old enough to access other retirement accounts as well. This way, we maintain flexibility while also reducing our current tax burden. We don’t have a 529. I’m a public-school teacher (maxing out a 457b and 403b and also contributing 10% toward a pension) and my spouse is a stay-at-home parent. I make six-figures but we are in the 12% federal tax bracket (and have a 0% effective rate for California income taxes). Many people prefer to put something into a 529 even though they haven’t maximized their own retirement space. Decide if that really is the best decision for your exact situation.
Thank you, Ron. This is great information.

Is there a recommended calculator online to show the affects on one's tax rate after increasing/decreasing deferred contributions? I'll research, but if anyone has a online tool they'd recommend, let me know.
I'm sure there are calculators out there but I'm not sure what's best to use. Perhaps someone else can offer a suggestion on that. I use an Excel spreadsheet and do the calculations myself as our taxes are a little bit complicated (we qualify for a subsidy on the health insurance exchange as long as we can keep our modified adjusted gross income below a certain level so I like to play with the numbers manually).

CountOnIt
Posts: 20
Joined: Thu Jun 14, 2018 12:51 pm

Re: pension, 403b, 457 questions

Post by CountOnIt » Wed Jun 19, 2019 1:44 pm

finfire wrote:
Wed Jun 19, 2019 1:04 pm



Only I have a traditional IRA (in VG). It is an IRA where I placed all my old 401ks in. Is this the existing traditional IRA you are referring to? I do not contribute to it..it simply holds my old tax deferred money. I don't think I can contribute a tax deferred amount , if I am already contributing to a 401K...am I wrong about that?

If I can lower my taxes via tax deferred, I'd be happier to contribute to Roths..but it may be wise to consider a smaller contribution via back door.
The problem is, when you convert a tIRA to Roth IRA, the tax is calculated on the basis across ALL your tIRA accounts. Once your income phases out the deduct-ability of the tIRA contribution, your contributions will be non-deductible and your rollovers could increase your tax liability.

Consider the following 3 cases:
Suppose you have no existing traditional IRA (tIRA) accounts: Now suppose you make a $6K non-deductible contribution to a tIRA. Because the contribution was non-deductible, you have a $6K basis in the tIRA. You then roll that IRA into a ROTH IRA. Because your basis ($6K) equals the value of the account, you have no tax due. This makes the whole operation equivalent to just putting $6K into a ROTH IRA.

Alternatively, suppose you have an existing tIRA account with $54K (and no basis). Now suppose you make a $6K non-deductible contribution to a tIRA. Because the contribution was non-deductible, you have a $6K basis in your tIRA's. You then roll that $6K into a ROTH IRA. Because your basis ($6K) equals 10% of the value of the tIRA accounts ($6K/$60K), you owe tax on 90% of the conversion (90%*$6K=$5.4K). This means you increased your taxable income by over $5K in the current year in order to move $6K into the IRA. You also now have $5.4K basis in your tIRA that you have to track into the future (headache).

Finally, suppose you have an existing tIRA account with $54K (and no basis). Now suppose you make a $6K deductible contribution to a 457/401(k). This contribution lowers your taxable income by $6K. Now, suppose you roll $6K of your tIRA into a Roth IRA. This increases your taxable income by $6K. The net effect is that you have $54K in tax-deferred accounts ($48K in tIRA and $6K in 457) and $6K in a Roth IRA. Your taxable income remains the same (-$6K + $6K = 0). You have no basis to worry about in the tIRA.

If you are already bumping up against contributions limits across your 457,401k,403b, then it limits your ability to execute on this approach. If you are not, then I would strongly suggest you make this approach. I strongly suggest you wrap your head around this before you make a backdoor Roth contribution in your name, or you will end up with a headache (tax liability and need to track basis) that you were not expecting.

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Wed Jun 19, 2019 2:13 pm

CountOnIt wrote:
Wed Jun 19, 2019 1:44 pm
finfire wrote:
Wed Jun 19, 2019 1:04 pm



Only I have a traditional IRA (in VG). It is an IRA where I placed all my old 401ks in. Is this the existing traditional IRA you are referring to? I do not contribute to it..it simply holds my old tax deferred money. I don't think I can contribute a tax deferred amount , if I am already contributing to a 401K...am I wrong about that?

If I can lower my taxes via tax deferred, I'd be happier to contribute to Roths..but it may be wise to consider a smaller contribution via back door.
The problem is, when you convert a tIRA to Roth IRA, the tax is calculated on the basis across ALL your tIRA accounts. Once your income phases out the deduct-ability of the tIRA contribution, your contributions will be non-deductible and your rollovers could increase your tax liability.

Consider the following 3 cases:
Suppose you have no existing traditional IRA (tIRA) accounts: Now suppose you make a $6K non-deductible contribution to a tIRA. Because the contribution was non-deductible, you have a $6K basis in the tIRA. You then roll that IRA into a ROTH IRA. Because your basis ($6K) equals the value of the account, you have no tax due. This makes the whole operation equivalent to just putting $6K into a ROTH IRA.

Alternatively, suppose you have an existing tIRA account with $54K (and no basis). Now suppose you make a $6K non-deductible contribution to a tIRA. Because the contribution was non-deductible, you have a $6K basis in your tIRA's. You then roll that $6K into a ROTH IRA. Because your basis ($6K) equals 10% of the value of the tIRA accounts ($6K/$60K), you owe tax on 90% of the conversion (90%*$6K=$5.4K). This means you increased your taxable income by over $5K in the current year in order to move $6K into the IRA. You also now have $5.4K basis in your tIRA that you have to track into the future (headache).

Finally, suppose you have an existing tIRA account with $54K (and no basis). Now suppose you make a $6K deductible contribution to a 457/401(k). This contribution lowers your taxable income by $6K. Now, suppose you roll $6K of your tIRA into a Roth IRA. This increases your taxable income by $6K. The net effect is that you have $54K in tax-deferred accounts ($48K in tIRA and $6K in 457) and $6K in a Roth IRA. Your taxable income remains the same (-$6K + $6K = 0). You have no basis to worry about in the tIRA.

If you are already bumping up against contributions limits across your 457,401k,403b, then it limits your ability to execute on this approach. If you are not, then I would strongly suggest you make this approach. I strongly suggest you wrap your head around this before you make a backdoor Roth contribution in your name, or you will end up with a headache (tax liability and need to track basis) that you were not expecting.
Thanks for the great explanation!

cuendillar
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Joined: Tue Mar 19, 2019 2:44 pm

Re: pension, 403b, 457 questions

Post by cuendillar » Wed Jun 19, 2019 5:44 pm

One thing that might be worth looking at are the fees associated with each account. For example, Florida university’s generally have an annual fee (based on dollar amount in the account) in addition to the ER of whatever fund you chose. In my case, the university made the contract but did not notify employees or update their documents for new hires until 2 years after the contract went into effect, meaning I did not know that until after I had determined where my money was going to go (pension, susorp 403b, retirement plan). The deferred comp plan has no fee other than the ER. As long as the provider you choose has the investment you want, the deferred Comp (457) is a better deal. Furthermore, if you leave the university, you can remove money from the 457 with no 10% penalty (but do pay taxes). So for me, the order of preference was susorp 403b (for match amount), 457/deferred comp to max, then IRA to max, then 403b to max. This gives about a $50k deferred tax advantage with the lowest fee structure and more flexible withdrawal options.

Topic Author
finfire
Posts: 107
Joined: Tue Aug 14, 2018 1:52 pm

Re: pension, 403b, 457 questions

Post by finfire » Thu Jun 20, 2019 7:51 am

cuendillar wrote:
Wed Jun 19, 2019 5:44 pm
One thing that might be worth looking at are the fees associated with each account. For example, Florida university’s generally have an annual fee (based on dollar amount in the account) in addition to the ER of whatever fund you chose. In my case, the university made the contract but did not notify employees or update their documents for new hires until 2 years after the contract went into effect, meaning I did not know that until after I had determined where my money was going to go (pension, susorp 403b, retirement plan). The deferred comp plan has no fee other than the ER. As long as the provider you choose has the investment you want, the deferred Comp (457) is a better deal. Furthermore, if you leave the university, you can remove money from the 457 with no 10% penalty (but do pay taxes). So for me, the order of preference was susorp 403b (for match amount), 457/deferred comp to max, then IRA to max, then 403b to max. This gives about a $50k deferred tax advantage with the lowest fee structure and more flexible withdrawal options.
Thanks for the reminder. Yes, even within same employer, if the same company offers 403b and 457, the choices are wildly different in terms of offerings and expenses. e.g. valid offers VG Total stock market at .02 in the 457b, but there is no VG offering at all in their 403b....it would have been nice to go with a single company for both plans, but does not look likely.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: pension, 403b, 457 questions

Post by retiredjg » Thu Jun 20, 2019 8:05 am

finfire wrote:
Wed Jun 19, 2019 9:30 am
If we had more $$ available should my wife put more in the Tax-Deferred 403(b), After-tax Roth 403(b) or 457? If we can't fully fund the tax deferred accounts, should she split funds between both...say, 10% in 403b, 10% in 457? At our tax rate, does it make sense to contribute to any Roth plan?
My suggestion is to put any extra money into Roth 403b, not more into a tax-deferred account. This is because of the pension.

It is possible to have too much in tax-deferred accounts. This particularly applies to people who will get a pension. Here is an example.

viewtopic.php?p=4602983#p4602983

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