457b - pretax vs. roth

[taggart]

Hi all,

I have a question regarding optimum contributions to my retirement account for next year.

I'm married, no kids. Single income ~300k/year. My job allows access to both a 403b and 457b supplemental plan.

My initial plan was to max out both accounts with 18k of pretax money = 36k pretax total. However per the financial guy here, I can choose to treat my 457b as a roth account and put upto 18k after tax dollars in there.

My question is - is it better to put away 36k pretax and reduce my AGI , or would 18k pretax and 18k roth work out better in the long run? There is an employer match on just the 403b so I will be receiving that regardless.

I was surprised to hear I could even do upto 18k as roth, given the contribution limit I keep hearing about is 5500.

Thanks in advance.

RPC

 

 

 

[jfoxcpacfp]

At your income level, I would split 50:50 Rothretax, but you're not (imo) going to go wrong either way and there are believers on both sides of the aisle in this forum. If you poke around a bit, you'll find a recent discussion on this very topic.

otoh, if you have the willpower and fortitude to invest the tax savings that you'll realize annually from the $18k pre-tax 457b, I would recommend all pre-tax.

[Peds]

disagree w/ jfox. 100% pretax. then backdoor rIRA.

[cgossage]

I think that is what she was getting at with the last line of her post.

[taggart]

Thanks for the helpful advice

I was going to go ahead and invest in my 457 until I read the latest WCI post.
The new tax plan seems to thoroughly dis-incentivize 457 saving or am I reading that wrong?

https://www.plansponsor.com/tax-reform-bill-unfavorable-nqdc-plans/

Reading through that - the income saved in the 457 will be taxed when it vests, so is there any point saving pretax in that account? Does it still make sense to use it as a Roth account?

Thanks

[cgossage]

taggart wrote:

Thanks for the helpful advice

I was going to go ahead and invest in my 457 until I read the latest WCI post.
The new tax plan seems to thoroughly dis-incentivize 457 saving or am I reading that wrong?

https://www.plansponsor.com/tax-reform-bill-unfavorable-nqdc-plans/

Reading through that – the income saved in the 457 will be taxed when it vests, so is there any point saving pretax in that account? Does it still make sense to use it as a Roth account?

Thanks

Click to expand...

Traditional Deferred Comp plans require taxation when the funds are vested for their employers and I believe WCI feels 457 plans would now fall into this same grouping.  I don't get that same understanding from my reading of the bill and am still recommending those that are eligible to contribute to their 457 plans if they are at stable (like going to be around in 100 years) institutions.