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quick asset allocation question: bonds in 457 plan?

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  • quick asset allocation question: bonds in 457 plan?

    Current retirement accounts are 403b, non-governmental 457, and bdroth for me and my spouse.

    The 457 is non-governmental, which I'm maxing out for at least the next 1-2 years for the tax benefit and lower AGI for PSLF payment calculation.

    I will have to withdrawal the 457 funds once I leave this employer, which I could see being anywhere from 6months to 6 years from now (). Either way, my anticipated forced withdrawal date is much sooner than the other accounts. I was thinking that considering the above, it would make sense to have all of my bonds located in this 457.

    Does this sound reasonable?

  • #2
    This is an interesting situation and one in which, if i were your FA, I would recommend high-quality corporate bonds and cash if you are so inclined to contribute to the NG 457b. Definitely falls within our short-term (< 5 yrs) rule.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Agree with jfoxcpacfp . If you’re not likely to stay there until you retire, you’ll have to pay tax on the 457 distribution, so I wouldn’t want that account to be any bigger through growth than it has to be. You’re more likely to be able to roll over a 401k/403b, in my experience, than a non-governmental 457. So get the equities in your 401k and Roth, and bonds in 457.

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      • #4
        I have my bonds in my NG 457b for this reason, but I wouldn’t change your AA based on this. Earlier this year my NG 457b was all stocks but now that the market has shot up I am shifting it back to bonds.
        I sometimes have trouble reading private messages on the forum. I can also be contacted at [email protected]

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        • #5
          Originally posted by Lithium View Post
          I have my bonds in my NG 457b for this reason, but I wouldn’t change your AA based on this. Earlier this year my NG 457b was all stocks but now that the market has shot up I am shifting it back to bonds.
          I actually think I need to change my AA, since it's all stocks right now. Was going to move most of the 457 to bonds and move some money out of some of the higher ER funds my 403b has investments in.

          Glad to hear the bonds in 457 plan makes sense. Looking over the options, the Principle Bond Market Index Inst Fund (PNIIX) appears to be the front runner from what's available, and I'll also direct some funds to the Vanguard Money Market Fund that's available based on jfoxcpacfp advice.

          Thanks all

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          • #6
            Originally posted by MaxPower View Post
            Agree with jfoxcpacfp . If you’re not likely to stay there until you retire, you’ll have to pay tax on the 457 distribution, so I wouldn’t want that account to be any bigger through growth than it has to be. You’re more likely to be able to roll over a 401k/403b, in my experience, than a non-governmental 457. So get the equities in your 401k and Roth, and bonds in 457.
            What's the tax rate for the distribution? I'm not getting consistent answers from online searches...I see some sites saying 20% and others saying it's whatever your tax rate is.

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            • #7
              Originally posted by hebel View Post

              What's the tax rate for the distribution? I'm not getting consistent answers from online searches...I see some sites saying 20% and others saying it's whatever your tax rate is.
              It’s considered income, so it is taxed at your marginal tax rate (so whatever income this distribution pushes you in to, which is likely higher than what you are normally since you’ll receive an infusion of cash upon distribution).

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              • #8
                I think most plans withhold 20% or so but in the end it’s taxed just like other income.
                I sometimes have trouble reading private messages on the forum. I can also be contacted at [email protected]

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