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If not my 457, then what?

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  • If not my 457, then what?

    I recently posted trying to figure out what to do with my non-governmental 457 and am leaning against using it. The biggest downside of the terms is that if I leave my employer I have to take it all immediately as a lump sum. The rest is good -- retirement distributions up to 10 years, clinic bankruptcy seems unlikely. The other bad thing is the target date funds have 0.99% fees, though some other funds have lower fees (I'd just have to figure out how to divvy up my money among the lower-fee funds). I can still get in on it for 2017 by withholding my pay in December if that turns out to be the better choice.

    If I don't use the 457, where do I put retirement savings after $18k in my 403b and $5.5k in a backdoor Roth? I'm getting a late start on building up my retirement nest egg so want to start making up lost time. My deal is my annual income is around $130k, together with spouse ranges from 150k-280k over past 5 years, on track this year for about $250k. Taxable will probably be around $150k. We live in an expensive area and I like my work, so I plan to work until my mid to late 60s (am now 45). This year I hit $18k on my 403b at the end of June, and would like to save another $10-12k in addition to the backdoor Roth. If the 457 makes the most sense, then I'll swallow my terror at having to figure out "mid-cap equity" vs. "fixed income" vs. " international equity" and pick a couple of funds with better fees than the target date funds. But if the 457 doesn't make sense, then were do I put the money?

  • #2
    Put it into a good ole' taxable account,  using ETFs.  Use growth ETFs more than value ETFs.  Biggest advantage:  maximal flexibility.

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    • #3
      The first part of the first sentence is fine. Choose tax efficient vehicles. Total stock and international are fine. Depending on taxe bracket munis might be fine. Either etf or MF are fine.

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      • #4
        Yes, do the backdoor Roth for each of you. Max an HSA if that's an option. After that, there's nothing wrong with a taxable account. No actively managed funds, no bonds unless they're munis.

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        • #5
          Our tax bracket will likely be 25-28%. I assume I shouldn't just put it all in ETFs, but in some kind of mixture of higher and lower risk investments. I'm disappointed that the target date funds have such high fees because I like the idea of having someone gradually changing the risk profile as I get closer to retirement. I guess if I have to do it myself I'll probably try to replicate that. I suppose I ought to keep any retirement investment accounts separate from other investment accounts we eventually might have (at the moment, none). I've heard good things about Vanguard so will start looking there. Anyway, I'd love more specific "how-to" advice for someone who's brand new to all of this.

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