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401k versus 457b
Posted on 1/18/19 at 11:33 am
Posted on 1/18/19 at 11:33 am
My employer just recently gave us the option to invest in a 457b (non governmental) as of 1/1/2019.
I have been dumping the minimum to receive the max match into my 401k. Each year my contribution percent goes up 1% automatically. I have it timed to increase with the date of my yearly increase. So my pay goes up and 1% of that automatically goes to my 401k.
Should I start dumping some money into the 457b instead of directing it all to the 401k?
Both are managed by Prudential.
TIA
I have been dumping the minimum to receive the max match into my 401k. Each year my contribution percent goes up 1% automatically. I have it timed to increase with the date of my yearly increase. So my pay goes up and 1% of that automatically goes to my 401k.
Should I start dumping some money into the 457b instead of directing it all to the 401k?
Both are managed by Prudential.
TIA
This post was edited on 1/18/19 at 1:31 pm
2
Posted on 1/18/19 at 2:01 pm to ThatsAFactJack
The big difference between the two is the 457b plan will allow you to start drawing out of it at age 55 (without incurring a 10% penalty).
The 401k usually does not.
The 401k usually does not.
Posted on 1/19/19 at 2:39 am to ThatsAFactJack
I don't think there is any set age as long as you are separated from your employer and meet some other criteria like retirement, death, hardship, etc..
Posted on 1/19/19 at 5:45 am to TheWiz
quote:
I don't think there is any set age as long as you are separated from your employer and meet some other criteria like retirement, death, hardship, etc..
That's what I thought at least with 457b. For instance if you retire at say 50 you could start withdrawing with no penalties as long as you are retired. Many fire departments use 457b plans and guys retire fairly young and can withdraw right away with no penalties. Or at least that's what I thought, maybe someone can clarify more.
Posted on 1/19/19 at 7:21 am to TheWiz
Yes you are correct my bad. Looks like you can draw $ out of it at retirement but not limited to a certain age.
Posted on 1/19/19 at 8:09 am to ThatsAFactJack
It’s deferred compensation. If your company goes bankrupt, will they still be able to pay you?
Posted on 1/19/19 at 11:47 am to Ric Flair
That's the catch with non-governmental 457 plans. There is a secondary risk from bankruptcy.
Posted on 1/19/19 at 2:21 pm to TheWiz
I’m not even sure there is a “retirement” restriction with non penalized withdrawals. I think you must simply not be employed at the place from which you deferred compensation.
Posted on 1/19/19 at 3:27 pm to Dawgfanman
457s have stricter disbursement rules if you are currently employed.
They have no withdrawal penalties upon separation of employment. There are no age based withdrawal penalties like the 401k.
If all things were equal, a 457 > 401k IMO.
However, they are not, 1) the 401k may have a matching contribution the 457 does not.
2) As noted, if it is a non-governmental 457, the funds are subject to the company's creditors unlike a 401k and a governmental 457.
They have no withdrawal penalties upon separation of employment. There are no age based withdrawal penalties like the 401k.
If all things were equal, a 457 > 401k IMO.
However, they are not, 1) the 401k may have a matching contribution the 457 does not.
2) As noted, if it is a non-governmental 457, the funds are subject to the company's creditors unlike a 401k and a governmental 457.
This post was edited on 1/19/19 at 3:28 pm
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