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  • 457(b) account question

    Hello WCI forum

    New attending and long-time WCI fan. I just found out that the university I work for has a non-governmental 457 (b) plan and I plan on using it for my 20% toward retirement (20% pretax to retirement, 10% toward wealth building). Please let me know if this sounds correct.

    I am currently maxing out what I understand are my available retirement accounts
    1. 403b (19,500)
    2. Family HSA (7000)
    3. My backdoor Roth (6000)
    4. Wife backdoor Roth (6000)
    5. Wife does not have a retirement account offered by her employer
    6. Rest is going into a brokerage account

    It makes sense that I take advantage of the 457 (b) account in order to get its pre-tax benefits (32% due to my tax bracket). The investment options in 457 (b) there are fine (I would place it into all into Vanguard 500 admiral index fund, use the brokerage account to diversify the portfolio as a whole). If I end the contract with the university anytime in the future, I would take the maximum 10-year distribution to decrease the impact on my income tax in the future. At least this way, I get the opportunity to let some money grow pre-tax-free before it gets distributed?

    Please let me know if this idea is financially sound. Thanks so much!

  • #2
    So this is not a state university?

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    • #3
      Originally posted by gchou View Post
      Hello WCI forum

      New attending and long-time WCI fan. I just found out that the university I work for has a non-governmental 457 (b) plan and I plan on using it for my 20% toward retirement (20% pretax to retirement, 10% toward wealth building). Please let me know if this sounds correct.

      I am currently maxing out what I understand are my available retirement accounts
      1. 403b (19,500)
      2. Family HSA (7000)
      3. My backdoor Roth (6000)
      4. Wife backdoor Roth (6000)
      5. Wife does not have a retirement account offered by her employer
      6. Rest is going into a brokerage account

      It makes sense that I take advantage of the 457 (b) account in order to get its pre-tax benefits (32% due to my tax bracket). The investment options in 457 (b) there are fine (I would place it into all into Vanguard 500 admiral index fund, use the brokerage account to diversify the portfolio as a whole). If I end the contract with the university anytime in the future, I would take the maximum 10-year distribution to decrease the impact on my income tax in the future. At least this way, I get the opportunity to let some money grow pre-tax-free before it gets distributed?

      Please let me know if this idea is financially sound. Thanks so much!
      Max HSA for 2021 is $7200.

      I would do the 457 if the university was on good financial footing.

      Comment


      • #4
        Originally posted by ENT Doc View Post
        I would do the 457 if the university was on good financial footing.
        Agree, especially since they are offering the option of a 10-year distribution if the OP chooses to leave rather than a lump-sum cashout. A non-governmental 457b carries some unavoidable risk, but the OP has maxed out all his other tax-advantaged account space and seems to be in a good financial position overall. OP, I would only use the 457b if you can also keep funding all your other tax-advantaged accounts at the 100% level, as they are safer (as the money in them belongs to you/your wife, not the employer).

        Comment


        • #5
          You will be paying capital gains on the taxable earnings so you will be a little short paying the marginal tax on the full balance. But it really depends on how the marginal tax rates are in the ten year withdrawal years.

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