403B or 457B

[platter]

My state university is offering both 403B and 457B for retirement.  They have the exact same investment options. I'm a new trainee and can only set aside about 8K for the year and planning to put all 8K for this year in 457B since it's a state plan, has no forced distribution upon leaving the university and my understanding is that I can withdraw money from 457Bs at any age. Of note, my roth IRA is already maxed out for the year.

Am I doing this right or should I go for 403B instead?

[Miss Bonnie MD]

any difference in fees? My 403b and 457b have same funds, but the annual fee is slightly higher in my 457b

[platter]

By fees do you mean expense ratio for that particular fund? Or is there a fee to maintain the acct itself?

[Miss Bonnie MD]

Additional fees - if any. Common to charge a fee for the account - either yearly or quarterly.

[platter]

The ER of the index fund (total stock market) I want is 0.04% and yearly acct maintenance fee is $16 for both 403B and 457B.

457B looks good?

[q-school]

You can leave money there indefinitely if you change jobs? My wife works for state and her 457 cannot be held if she leaves. Has to either be distributed or transferred to a state 457. Possible undesirable issue wth 457

[Miss Bonnie MD]

You can roll a state 457b to an IRA

[jfoxcpacfp]

q-school wrote:

You can leave money there indefinitely if you change jobs? My wife works for state and her 457 cannot be held if she leaves. Has to either be distributed or transferred to a state 457. Possible undesirable issue wth 457

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This can be a problem with NPO 457's but not government 457's.

[q-school]

I believe rolling 457 to ira will affect access to backdoor Roth ira. It's not necessarily reason not to do it. Just a potential future issue.

Will double check with state about ability to retain 457. Thanks for that info.

[jfoxcpacfp]

q-school wrote:

I believe rolling 457 to ira will affect access to backdoor Roth ira. It’s not necessarily reason not to do it. Just a potential future issue.

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Yes, that is correct.

[Dreamgiver]

I'd do the 403b with Roth contributions (I guess you are a resident in a low income bracket if 8k is all you can do). 403b is more portable.

[q-school]

If you are definitely going to retire early and need bridge money until eligible for 403 it may mar some sense to do both? Some plans historically forced you to take all out at separation but many seem now willing to let you take out over time lessening the tax hit. If you really aren't going to need money until eligible for withdrawals without penalty it may not matter much.

[platter]

Thanks for the suggestions.

I was told by Fidelity that my university's 457B can be left as is indefinitely.

I only want to do  457 or 403B, not both. Funds are limited to 8K for the year and I don't want to pay an annual $16 maintenance fee for 2 accounts instead of one.

I like the flexibility of 457B in terms of early withdrawal. Mainly because my parents don't have a dime to their name for retirement and are in fact in debt. I can never know when I might have to pull money to help them out.

I rather not do the Roth version because I have a relatively high salary for the previous year (worked as an attending x 1 year) and I'm trying to reduce my AGI/MAGI.

So given the above, does 457 sound reasonable or still opt for 403B?

[nachos31]

The 457 sounds reasonable in your case. If you do decide to rollover to IRA you can always do a Roth conversion--depending on tax brackets etc.

I did this last year where I converted my university residency program's 457b to Roth IRA after finishing residency.

[artemis]

platter wrote:

I like the flexibility of 457B in terms of early withdrawal. Mainly because my parents don’t have a dime to their name for retirement and are in fact in debt. I can never know when I might have to pull money to help them out.

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Time for some tough love:  DO NOT even think of raiding your own retirement savings to help out your parents!  Any help you give them should come from savings you have not earmarked for your own retirement.  Otherwise you risk ending up just like them in your own old age.

This is reason enough to put the money into a 403b, where it will be safe.