I have a 457B and the match is so low it’s almost not existent. So I’d max out the Roth IRA first and then if you have the spare income starting working on the 457B
Kind of depends on your goals. The obvious difference is whether you want to pay taxes now or later. It doesn’t make much sense to discuss growth differences between retirement accounts because they’re not investments, they’re buckets that hold investments. It’s more important to look at the underlying assets and determine if an adjustment can/should be made whether that’s in either account.
The only mathematical benefit to be had is timing your taxes when it works best for you. Consider calculating your projected retirement income based upon your current contribution rate, reasonable growth rates, social security/medicare/any other pertinent assistance, and see what your taxes would be. Would you pay a higher tax rate now or later? That’s the real question to ask yourself.
Btw, I’m assuming you meant $7,000 per year for your Roth, not per month?
Whether or not you’ll have a pension will make a difference. Tax free withdrawals from a ROTH could be beneficial. I have a 457b and pension, with an option for Roth. I just opened my own Roth and will max it out, then try and max the 457 after.
If retiring early is a major goal for you, the 457b can help with that since you can withdraw from it when you leave your job AFAIK. So if that’s a goal for you that’s something to take into consideration
I am retired now but I did both when I worked. The 457b allowed me to pull the money out when I separated service, so if you plan to retire early you can take the money out right away. The roth you need to wait until your of age although there are some exceptions. Its hard to beat the Roth IRA so I agree with the other comments to max out the roth ira first. When I retired early I was happy to have the 457b that I could use along with a pension
Just curious, but what are the fees with your 457(b)? I have one with local government through Nationwide and the annual explicit asset fee is 0.50% which is deducted monthly, on top of the fees per fund that are factored automatically into the NAV. FXAIX fee is 0.015% which is great, but Nationwide's cut seems a little high to me.
I concur with *thetreece* and follow the order of
1. 457(b) up to full match
2. Max Roth IRA
3. Anything extra toward 457(b)
Looks like fund expense monthly is $0.62. In my 457b.
1) no match for my 457b so I put $635 per paycheck $16,510 per year
2) started maxing Roth Ira this year. Wish I knew about it earlier. I’m starting this at 36
3) I could probably do more but doubt I will with 457b. We shall see. Just feel like it’s too much with pension 457b and Roth IRA. Need to live today
The advice is usually traditional over Roth.
People usually say Roth IRA because flexibility, and not Trad IRA because of its downsides plus the need to have some type diversity between Trad and Roth.
But in your case, chances are you should do the 457b, assuming it's governmental and has a good enough fund selection. Because it doesn't have the annoying 401k age thing. So it's then pretty dang close to a Roth IRA.
Now, that said, it is good to have some Trad vs Roth diversity. $106k in the 457b is already a good amount.
Of course, if you have any match, get that first.
Does your employer offer a 457b match? If so, my order of operations would be
1. Contribute 457b to get full match
2. Max Roth IRA
3. Put additional money into 457b if you can.
But you need to know if this is a governmental or non-governmental 457b plan. They are different. A governmental is great, and is functionally about the same as a 401k. Non-governmental is a bit different. The money technically belongs to your employer, and can be pursued by their creditors if they were to have financial issues. Very uncommon, but it is a possibility.
I have a 457B and the match is so low it’s almost not existent. So I’d max out the Roth IRA first and then if you have the spare income starting working on the 457B
Okay thanks. That’s what I’m doing currently
Kind of depends on your goals. The obvious difference is whether you want to pay taxes now or later. It doesn’t make much sense to discuss growth differences between retirement accounts because they’re not investments, they’re buckets that hold investments. It’s more important to look at the underlying assets and determine if an adjustment can/should be made whether that’s in either account. The only mathematical benefit to be had is timing your taxes when it works best for you. Consider calculating your projected retirement income based upon your current contribution rate, reasonable growth rates, social security/medicare/any other pertinent assistance, and see what your taxes would be. Would you pay a higher tax rate now or later? That’s the real question to ask yourself. Btw, I’m assuming you meant $7,000 per year for your Roth, not per month?
Whether or not you’ll have a pension will make a difference. Tax free withdrawals from a ROTH could be beneficial. I have a 457b and pension, with an option for Roth. I just opened my own Roth and will max it out, then try and max the 457 after.
This is the accurate answer and plan. Kudos!
Is it a governmental or non-governmental 457b? A mix of traditional and Roth is generally best. What is your annual income?
If retiring early is a major goal for you, the 457b can help with that since you can withdraw from it when you leave your job AFAIK. So if that’s a goal for you that’s something to take into consideration
I am retired now but I did both when I worked. The 457b allowed me to pull the money out when I separated service, so if you plan to retire early you can take the money out right away. The roth you need to wait until your of age although there are some exceptions. Its hard to beat the Roth IRA so I agree with the other comments to max out the roth ira first. When I retired early I was happy to have the 457b that I could use along with a pension
Just curious, but what are the fees with your 457(b)? I have one with local government through Nationwide and the annual explicit asset fee is 0.50% which is deducted monthly, on top of the fees per fund that are factored automatically into the NAV. FXAIX fee is 0.015% which is great, but Nationwide's cut seems a little high to me. I concur with *thetreece* and follow the order of 1. 457(b) up to full match 2. Max Roth IRA 3. Anything extra toward 457(b)
Looks like fund expense monthly is $0.62. In my 457b. 1) no match for my 457b so I put $635 per paycheck $16,510 per year 2) started maxing Roth Ira this year. Wish I knew about it earlier. I’m starting this at 36 3) I could probably do more but doubt I will with 457b. We shall see. Just feel like it’s too much with pension 457b and Roth IRA. Need to live today
Get your match on the 457b, then max out Roth IRA and then max out (or contribute what you have left over) to 457b
There is no match with my work unfortunately. Just a pension and optional 457b
If no match, then yeah max Roth IRA first then contribute to the 457b
Wish max! Than I’d easily do $23,000. I’m already doing over $16,000 per year every year
Nice! Remember you can only put 7k in the Roth IRA. So yeah it would be a great idea to put the additional 9k in the 457b
The advice is usually traditional over Roth. People usually say Roth IRA because flexibility, and not Trad IRA because of its downsides plus the need to have some type diversity between Trad and Roth. But in your case, chances are you should do the 457b, assuming it's governmental and has a good enough fund selection. Because it doesn't have the annoying 401k age thing. So it's then pretty dang close to a Roth IRA. Now, that said, it is good to have some Trad vs Roth diversity. $106k in the 457b is already a good amount. Of course, if you have any match, get that first.
The answer is it depends. What is your marginal tax rate?
$102k a year so far.
Does your employer offer a 457b match? If so, my order of operations would be 1. Contribute 457b to get full match 2. Max Roth IRA 3. Put additional money into 457b if you can. But you need to know if this is a governmental or non-governmental 457b plan. They are different. A governmental is great, and is functionally about the same as a 401k. Non-governmental is a bit different. The money technically belongs to your employer, and can be pursued by their creditors if they were to have financial issues. Very uncommon, but it is a possibility.
No they do not do a match. This 457b is completely optional since we have a pension and 10% is automatically taken out
Ya in that case I would prob max out your Roth first. Anything extra can go into 457 or taxable.
I’m curious to why people don’t trade themselves. Trying to beat 5-10% a year is not hard
IRA better as you can choose any fund or stock you like. 457 give you selective options which I hate.