NYC 457 Deferred compensation plan - is it safe?

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Bambuk
Posts: 16
Joined: Sun Apr 05, 2015 9:34 pm

NYC 457 Deferred compensation plan - is it safe?

Post by Bambuk » Tue Jun 12, 2018 6:18 pm

My wife works for the City and she can put some money into both 401K and/or 457 Deferred compensation plan.
On the first glance , the 457 plan is better since there is no early withdrawal penalty.

I read some article advising against such plans offered by private companies since if the company goes BK - there is a possibility of losing some of the money in the 457 plan.
Can it be the case with the plan offered by NYC? States go BK AFAIK.
Does anyone know if there is a danger of losing part of the money in this plan if the city has financial troubles in the future?

Actually the 401K is also called Deferred compensation. So does it mean they are on the same level of safety?

Any advice appreciated.
Thanks.

retiredjg
Posts: 32710
Joined: Thu Jan 10, 2008 12:56 pm

Re: NYC 457 Deferred compensation plan - is it safe?

Post by retiredjg » Tue Jun 12, 2018 6:37 pm

There are two different types of 457b plans.

A governmental 457b plan should not have any safety concerns. Assets are not subject to creditors of the employer. The 457b can be accessible at will once employment ends and the assets can be rolled into an IRA if desired.

A non-governmental 457b plan can have concerns because the assets are subject to the creditors of the employer. You could actually lose your money although I do not think this is common. The assets cannot be rolled into an IRA - they can only be rolled into another non-governmental 457b plan. Sometimes, the withdrawal options are awkward and limited. Some people do choose to use these plans, but some do not.

I would not be worried about using the 457b plan (deferred comp plan) of NYC.s. Whether this plan is needed in addition to the other plan or as a substitute for the other plan is a subject for a different discussion.

simplex
Posts: 2
Joined: Sun Jan 18, 2015 10:04 pm

Re: NYC 457 Deferred compensation plan - is it safe?

Post by simplex » Wed Jun 13, 2018 8:40 am

Retiredjg, perhaps you could weigh in on the desirability of the 457? I'd appreciate it as my spouse has access to it, but uses the 403b Tax Deferred Annuity option (fixed at 7%). We wonder whether the flexibility of the 457 should get some priority over the 7%.

Long term goal would be to max both, but can't just yet. So we sit and stew!

Bambuk, thanks for asking this question.

retiredjg
Posts: 32710
Joined: Thu Jan 10, 2008 12:56 pm

Re: NYC 457 Deferred compensation plan - is it safe?

Post by retiredjg » Wed Jun 13, 2018 9:13 am

simplex wrote:
Wed Jun 13, 2018 8:40 am
Retiredjg, perhaps you could weigh in on the desirability of the 457? I'd appreciate it as my spouse has access to it, but uses the 403b Tax Deferred Annuity option (fixed at 7%). We wonder whether the flexibility of the 457 should get some priority over the 7%.

Long term goal would be to max both, but can't just yet. So we sit and stew!

Bambuk, thanks for asking this question.
I can't comment because I don't know anything about the plans. However, there are a number of people here from NY and NYC. I think you'll get more answers. If not, stir the pot a second time and see what comes up.

You can also use the google box above right to find previous threads. Just type in NYC 457 and see what pops up. Other word combinations might turn up other things too.

terran
Posts: 668
Joined: Sat Jan 10, 2015 10:50 pm

Re: NYC 457 Deferred compensation plan - is it safe?

Post by terran » Wed Jun 13, 2018 9:19 am

simplex wrote:
Wed Jun 13, 2018 8:40 am
Retiredjg, perhaps you could weigh in on the desirability of the 457? I'd appreciate it as my spouse has access to it, but uses the 403b Tax Deferred Annuity option (fixed at 7%). We wonder whether the flexibility of the 457 should get some priority over the 7%.

Long term goal would be to max both, but can't just yet. So we sit and stew!

Bambuk, thanks for asking this question.
If you're saying you would have to give up a 7% match to use the 457 instead of the 403b, I wouldn't do that. A match is a 100% immediate return. Even if you rolled it over to an IRA and withdrew immediately you'd only pay a 20% penalty, so you'd still be better off by 80% even though the 457 doesn't have an early withdrawal penalty. If the plan would let you switch to the 457 after you've hit the 403b match that might be worth doing, though. That would depend on the available investment options in each, and if there are any additional fees in the 457.

NavyIC3
Posts: 25
Joined: Wed Jan 10, 2018 2:18 pm

Re: NYC 457 Deferred compensation plan - is it safe?

Post by NavyIC3 » Wed Jun 13, 2018 2:56 pm

The NYC 457 plan is held in a trust and is protected against creditors. I enrolled in NYC 457 plan in 1986 when it first came into existence. The plan has gotten much worse over the years. They do not publish newsletters any more so there is no way of knowing what's going on with the plan. The info on their site is outdated. They do not participate in the Public Safety Officers program for first responders. Phone wait times are extremely long. Almost every fund has underperformed it's benchmark.It's a shame that the plan went so far down hill.

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