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New attending- regarding government 457 b and 403 b plan

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  • New attending- regarding government 457 b and 403 b plan

    I am a new attending out of fellowship this July who is looking for some advice regarding investment accounts as I am getting conflicting information from different sources.
    To begin with, during my fellowship I had a governmental pre-tax and Roth 457b plan (VALIC) in which I had invested about 8500$ in 2021. I did not contribute to a 403b or 401k during fellowship. However, in my new job as an attending I have a pre-tax and Roth 403b and a non governmental 457b plan with 19,500 $ limit in each plan. These plans are through Lincoln Financial services. When I spoke to the Lincoln financial advisor/ representative, they told me that I can only invest about 11k$ in my 403b plan, because it is similar to the governmental 457b plan at my fellowship to which I have already contributed $8.5k this year. They also said I can roll over my previous investments into the current 403b plan. However, online research tells me that 457 b and 403 b plans are completely different with each having its own 19.5k$ limit.
    Having said that, they (Lincoln financial) are okay with me investing 19.5k$ in the current non-governmental 457 b plan even though I have about 8500$ in my previous governmental 457 b plan. However, I am not sure if this is accurate, and wondered if it is okay to contribute the full amount to my new 457b plan after contributing $8500 to my fellowship plan earlier in the year.

    Should i disregard the advisor and contribute 19.5k in my 403b and 11k in 457b which seems the right thing to do?
    Or I should listen to the advisor and contribute 19.5 k in my 457b and 11k in 403b?

    Any input would be helpful.

  • #2
    Bump.

    Just to summarize:

    First half of the year you contributed $8500 in governmental 457b through fellowship and nothing in other retirement plans.

    Second half of the year you have access to 403b and non-governmental 457b?

    Have you contributed anything to the non-governmental 457b yet?

    Comment


    • #3
      403b and 457 limits are separate. You can do 19,500 in each. If previous 457 is governmental you should be able to roll over to 401k or 403b.

      Get a new advisor.

      Comment


      • #4
        OP can't get a new advisor...this is just a person on the phone with the company that administers the retirement plans at his/her new place of work.

        That said, the person on the phone is wrong on just about everything. If you think your new place is financially sound and the new 457 plan has low expense ratio funds and good distribution options (i.e. lets you take the money out over an extended period of time of 5 or more years) you should consider using this. That said, I do believe the amount you contributed to the 457 governmental this year will counts against the $19.5k total you can put in your non-governmental 457 plan this year.

        But as others said, contributions to the 457, whether governmental or not, do not in any way hinder maxing out a 403b/401k plan. You can still max the 403b plan of $19,500 this year if you actually make enough money between now and the end of the year. Otherwise plan to max next year. The max contributions for both the 403b and 457 go up next year to $20,500.

        As for what you should do with your old governmental 457 plan, when you left did they make you pick already what to do with it? You don't want to roll it into your new 457 plan, even if that's an option. You can roll it over to your 403b but I believe the problem with that is you can't get 403b money out of the plan until much later in life (55 or 59.5 years, depending) whereas 457 money you can draw down on as soon as you're not working at the place where you were accumulating the money

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        • #5
          The question about what to do with the governmental 457b wasn't specifically asked. If the funds are in Roth contributions, I think it is easy and they should just be rolled over to a Roth IRA. If they are pre-tax there are three main options, and the right option depends on the person and the available plans.

          1) Leave the funds in the old plan
          2) Move to the new 403b plan
          3) Convert to Roth IRA and pay the taxes.

          As a half resident, half attending, it's definitely not a bad time to convert as long as your taxable income for the year is in the 24% bracket or less. This is likely true for a single person unless it's a pretty high paying specialty.

          https://taxfoundation.org/2021-tax-brackets/

          Comment


          • #6
            I don't have any specific knowledge of your attending 403b and non governmental 457b plans. However, Lincoln Financial very often has expensive investment options. If that is the case, I would be inclined to rollover any governmental pre-tax or Roth 457b assets to a Roth IRA. The pre-tax rollover will be taxable.

            As previously pointed out, there is single 457b (employee + employer) contribution limit across all 457b plans. It is equal to, but totally separate from the employee deferral limit across all 401k, 403b and SIMPLE IRA plans.

            Comment


            • #7
              Thanks everyone, after reading all your responses I have come to the following conclusions -

              I can and will maximize my 403b contribution for this year which is 19.5 k.
              Regarding the previous governmental 457b plan, i think it is wise to just roll over to a a ROTH IRA and pay the taxes. They did not make me choose an option as to what to do with it.
              I have invested about 8k in my current non-governmental 457 b plan, so i will max it out to 19.5 k including my previous contributions which will be only 3k.

              Thanks for all the advice, appreciate it.

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