457 plans

[q-school]

They seem to be a very popular thing on this board.  My wife works for government, and so we always had her max her 457.

I work for a nonprofit and elected not to participate for many years.  I never thought about retiring early anyways and for many years the tax rates were lower than current rates, especially capital gains.  Additionally for my situation, the only option was to take the money out lump sum when leaving the organization if the new place didn't have a government 457 to roll into.  There are now more options for distribution in my case.  After filling other buckets and due to those changes,  I now have started using the 457.  I am trying to decide how much money to keep in it though.

https://www.whitecoatinvestor.com/should-you-use-your-457b/

how do you evaluate if your nonprofit is a safe haven for long term monies?  iow, on the wci flowchart, one of the branch points is "worried about credit risk of your employer?"

how do we evaluate these things?

thanks

 

[CM]

Do you have access to your institution's financial statements?

Has your institution issued debt rated by Moody's or S&P or Fitch?

[Miss Bonnie MD]

I checked my hospitals' credit rating. And it is the largest hospital system in the state.

[nfldoc]

Similar to Miss Bonnie, I checked out the credit rating for my wife's hospital system. It was Aa3 and AA-, so pretty low risk. We went ahead and fully funded her 457 plan.

[q-school]

is that all there is?

check credit rating?   how often should we check?  how do we know it is accurate?  why are there so many grades?

is there other way to check than this?

my broke ****************** state apparently has a bbb- rating which isn't that low on the scale.

on the other hand my hospital has had several bond releases grade aa.  which is only couple grades better than bbb- but only one grade from top aaa.

 

let's say a creditor wanted its money.  how broke would the hospital system have to be to be allowed to access the 457?

when i was in wisconsin, there is/was a physician superfund where physicians contributed to this pot of money in case of massive malpractice awards.  over the decades it built up over 1 billion dollars.  then the state was broke and saw all this money sitting there and just decided to help itself when the budget got out of control.  they left an iou behind.  it left a bad taste in my mouth.

 

 

[CM]

q-school wrote:

check credit rating?   how often should we check?  how do we know it is accurate?  why are there so many grades? is there other way to check than this? my broke ****************** state apparently has a bbb- rating which isn’t that low on the scale. on the other hand my hospital has had several bond releases grade aa.

Click to expand...

If your hospital's bonds are AA, then Standard and Poor's (or Fitch) considers your hospital to be at very low risk of bankruptcy. This is a very solid rating. You might check to see if Moody's and Fitch concur.

There are three major companies that rate bonds. That's why there may be more than one grade.

You don't know if the rating is "accurate." All of the agencies covered themselves with mud during the housing bubble. However, that event probably increased the likelihood that subsequent analyses will be performed with more rigor.

If you have access to your institution's financial statements (perhaps they are published), you can assess the strength of the balance sheet yourself--or ask/hire someone to do this for you.

My understanding is that your 457b funds should be safe unless your institution declares bankruptcy. The credit rating assesses the likelihood of bankruptcy (default on bonds), and S&P thinks you're in good shape.

You can get some idea of the low likelihood (based on historical experience) of default for AA credits here: http://blogs.reuters.com/muniland/2014/03/21/the-risk-of-muni-default-and-bond-insurance/

[TheAbacus]

As long as your hospital is not directly able to influence the credit ratings agencies (like the investment banks did in 2008 & years prior), then you should be fine.

[jz]

search words :   "beckers hospital bankruptcies"  You will find the actual hospital bankruptcies annually.   Seems like these are foreseeable events.

[Miss Bonnie MD]

Honestly I don't worry too much about it, at least right now. My hospital is thriving. Good thing w 457bs is you can withdraw before age 59.5 if need be. But obviously pay income taxes on it.