"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message news:<pm0Yc.264150$OB3.53095[at]bgtnsc05-news.ops.worldnet.att.net> ...

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I didn't mean to say that withdrawals from the 457 plan are tax-free.
I know that they aren't. I meant that, unlike 403(b), they are not
subject to the 10% tax penalty.

"Future Retiree" <futureretiree[at]hotmail.com> wrote in message

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Yes, but it is not tax-free, just penalty free. You will still have to pay
income tax on any and all distributions.

Elizabeth Richardson

"Rich R" <richr[at]dls.net> wrote in message news:<KumdnXbJycYOArLcRVn-rQ[at]dls.net> ...

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Good point. I did look at fees, and in my 457 plan Citistreet
charges a 0.24% "administration fee" and a $6 annual participation
fee, which seems reasonable. Another interesting feature is that
several of the funds currently rebate 20 or 25 basis points to
plan participants.

As far as I can tell, in my case the only possible disadvantage of
choosing to max out the 457 plan before the 403(b) is the limited
fund selection offered by Citistreet, but I should be able to cover
the basic asset classes (stable value, bonds, large-caps, international)
with 4-5 funds, and then use the 403(b) if I need something more
esoteric. The fact that I can cash out a 457 plan before retirement
without paying a tax penalty (pointed out by another poster) could be
quite valuable.

Please look at fees! It would not surprise me if Citystreet added 1% ontop
of the fund fees.


"Future Retiree" <futureretiree[at]hotmail.com> wrote in message
news:e3236dde.0408271011.352cd770[at]posting.google.com...
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"Future Retiree" <futureretiree[at]hotmail.com> wrote in message > My understanding is that I can roll over a 457 plan into a 403(b)
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You may not want to move your 457 money even if you leave this employer.
Once you move the money to a 403b or an IRA it ceases to be a 457 and the
benefit of being able to take the money without penalty before age 59.5
disappears.

Elizabeth Richardson

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<cjbui0p41g39lkgeobe13qsnqjuo96ospr[at]4ax.com> ...

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The DB plan at my current employer seems quite attractive:
2.3% * years of service * average of 3 highest salaries.
Unfortunately, the vesting period is fairly long, and even
if I leave after vesting, I can only withdraw my own contributions,
not the matching funds. Had I been sure that I'll stay with this
employer until retirement, I would've gone with the DB plan,
but at the moment portability of my retirement funds in case
I switch jobs seems more important.

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That's what I did. I looked at some annuity contracts offered by
the insurance companies. They all had surrender charges and
substantial account management fees on top of expenses charged
by the underlying mutual funds, and, most importantly, I could not
figure out what additional benefits/riders/options they offer.
So I chose Fidelity.

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I noticed that, and figured it might make sense to max out the 457
before the 403(b), but was not sure whether I am missing something.

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Investment diversity is better in the 403(b) plan (I can pretty
much choose any Fidelity fund), while the 457 plan is limited to
10 funds or a Schwab brokerage account. The 10 funds look pretty
solid, though. I suppose I can buy anything I want through Schwab,
but I am not a seasoned investor and a little bit leery of
trading in and out of mutual funds through a brokerage account.

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In my case, they offer 3 Vanguard funds among the 10 choices:
Wellington, Institutional Index and Growth Index. Vanguard was
the 403(b) provider at my old employer (which I am now planning to
roll over into an IRA and leave at Vanguard), and I was very happy
with them.

Thanks for the comments!

Ron Peterson <ron[at]shell.core.com> wrote in message news:<10ite1hr055ka58[at]corp.supernews.com> ...

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My understanding is that I can roll over a 457 plan into a 403(b)
or IRA. Even if I leave state employment but stay in education,
I can roll over my 457 into 403(b), or if I leave education
altogether, I can roll both into an IRA. Am I missing something?

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message news:<wEGXc.522219$Gx4.141933[at]bgtnsc04-news.ops.worldnet.att.net> ...

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That's what I figured. It looks like I should max out the 457
before putting anything into the 403(b) (I am hoping to max out both,
at least until I buy a house next year). I've never seen a 457
plan before, and was not sure if there are some quirks that I need
to be aware of.

"Future Retiree" <futureretiree[at]hotmail.com> wrote in > - 403(b), which seems pretty standard: up to $13,000 a year, choose
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Plans differ because of administration, and therefore investment choices. I
think the biggest difference between a 457 and a 403b is that with a 457 you
can take the money, WITHOUT PENALTY, when you leave service regardless of
age. All other things being equal, this makes the 457 the more attractive
option. You are not required to take the money at age 40 if that is when you
leave this employer, only that you can. If there is any chance you might
retire before age 59.5, you should see to it that you have some funds
available to you for which you will not incur a penalty.

Elizabeth Richardson

On 26 Aug 2004 20:30:09 GMT, futureretiree[at]hotmail.com (Future
Retiree) wrote:

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snip


Not enough here to advise, so here are two general comments.

1. Defined benefit plans (DB) - particularly public ones - are
attractive in that they pay a guaranteed amount in retirement (a major
challenge today is arranging lump-sums for dependable income - you
haven't lived until you visit with an 85-year old trying to juggle his
retirement accounts). Plus, many offer annual cost-of-living
adjustments that are great for those expecting average-to-longer life
expectancies.
The negative for DB is that if you don't earn 25-30 years of
service or retire at 65, there will be early-retirement penalties not
present in the alternative defined contribution (DC) plan. So if you
don't see a full career at this plan, the alternative DC might be
best. Also, watch using annuities/insurance companies in the
alternative DC - they often have messy surrender charges when you
leave your current employer and wish to roll the account to your new
custodian, or at retirement when you wish to consolidate accounts. So
always check when dealing with such. Personally, I'd just stick with
mutual fund custodians like Fidelity.

2. As for 403b and public 457 plans, tax-wise they are similar and you
are correct that you can use both to the max. About the only
difference might be the afore-mentioned surrender charges (difference
between annuities and mutual funds) and the fact that 457 plans are
not subject to the premature distribution penalty at age 59.5 or 55
(important for those wishing to retire and use the money before 55).
At any rate, this is not an irrevocable decision and you can usually
shift new contributions later if you wish. My choice would be based
on internal expenses and investment diversity. Citistreet administers
our state's plans and does a good job. And if they offer some good
Vanguard funds, so much the better.


-HW "Skip" Weldon
Columbia, SC

Future Retiree <futureretiree[at]hotmail.com> wrote:

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Pick the one that you are likely to stay in. If you are likely to stay
in education, pick the 403(b).

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That's a good case for not putting all $26,000 in both retirement
accounts.

--
Ron

I recently joined a state university as a faculty member. We have three
retirement programs:

- Mandatory program, in which 6% of my salary are invested either in
the state-run defined-benefits plan, or in a defined-contributions
plan where I can choose among Fidelity or several insurance companies.
This money is matched by the university. I have to make an irrevocable
selection of either the defined-benefits, or the defined-contributions
plan within 90 days. The defined-benefits plan is quite attractive,
but since I am not sure I'll stay at this university long enough to take
full advantage of it, I'll probably go with Fidelity (I don't know much
about annuities offered by the insurance companies, and afraid to sign
up for something I don't understand).

- 403(b), which seems pretty standard: up to $13,000 a year, choose
from a few dozen mutual fund and insurance companies (but no Vanguard,
the 403(b) provider at my old job, which I really liked).

- 457 plan, which I've never encountered before. From what I understand,
I can use it to shelter up to $13,000 *on top* of my 403(b). It is
administered by Citistreet, and can be invested in a small selection of
mutual funds (quite reasonable ones, including even some Vanguard funds)
or a self-directed brokerage account.

The benefits office gave me some overview materials, but they couldn't
really answer my question about the disadvantages of the 457 plan vs. the
403(b). Are there any? Should I max out the 457 and then put as much
into the 403(b) as I can, or vice versa - max out the 403(b) first?

At the moment, I can easily afford to shelter the full $26,000 + 6% of my
salary + put something into Roth IRA. Next year, however, I am planning
to buy a house, which I reckon will greatly reduce my disposable income
(from what I see, houses are huge money pits, but everyone has been
telling me that I should stop renting and start owning), and I may not
able to contribute to both 403(b) and 457 to the hilt. Which one should
I max out first? Does the equation change if I am planning to leave my
current employer in 5 years? 10 years?

Any advice is appreciated.