403(b) and 457 Plans - How They Work Together
Рет қаралды 31,019
Күн бұрын2022 Financial Planning Cheat Sheet www.theastuteadvisor.com/2022...
403(b) and 457 plans are common retirement investing options for public school teachers, employees, and education professionals. There’s a lot to consider when saving for retirement.
In fact, teachers have more choices than employees in the private sector and the options can be confusing. In addition to some of the nuances involved with CalSTRS and Social Security, many teachers are eligible for 403(b) and 457 plans.
In this video, we’ll take a closer look at 403(b) and 457 plans and examine how they can work together. For additional information on these retirement investing plans, please review my article linked below:
www.theastuteadvisor.com/403b...
⚠ Please don’t take this video as specific advice for your specific situation. Consult your own tax, legal and investment advisors. 👍
➡ Find out more about me at www.theastuteadvisor.com/
➡ Follow on Facebook / bridgeviewcapitaladvisors
➡ Follow on Twitter / davidnwaldrop
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#DavidWaldrop #investing #403(b) #457 #teachers
@annjean8709 3 жыл бұрын
Great video! Thank you for sharing.
@mauriccionavarrete6882 4 жыл бұрын
Great information! Thank you so much this video really helped. Now I hope to help my mom who’s a public school paraeducator and is over 50 and did not know anything about retirement accounts. Thanks again!
@davidn.waldropcfp2260 4 жыл бұрын
I’m glad you found it helpful. You should also check out my 2020 Financial Planning Cheat Sheet (linked below). It’s been updated for the new retirement rules taking effect this year. www.theastuteadvisor.com/2020cheatsheet
@BawlsNo Жыл бұрын
Great info! Thank you so much!
@davidn.waldropcfp2260 Жыл бұрын
Glad it was helpful! I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
@marissarodgers7469 4 жыл бұрын
Thank you for this information! I have been contributing to my 403b and this month found out we had a 457. I was going to cancel it because I didnt realize what it was. 🤦🏼♀️ Learning as I go. Again, thanks!
@davidn.waldropcfp2260 4 жыл бұрын
That's awesome Marissa! Glad you found this helpful. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@DevinCarroll 5 жыл бұрын
Great discussion on this topic. The 403(b) plan is one that's fairly common, but the 457 is a bit more obscure. I've met several people who have never even heard of a 457 until they go to work for an employer that offers this plan. Good stuff!
@davidn.waldropcfp2260 5 жыл бұрын
So many options that it's no wonder people get confused. Part of me wonders how many people just throw up their hands as a result of too many options.
@ChristopherSDennis 5 жыл бұрын
Very helpful video. Can you speak about what is referred to as a top hat 457b plan? What is the difference?
@davidn.waldropcfp2260 5 жыл бұрын
In general, Top Hat refers to non qualified deferred compensation plans for a select group of highly compensated employees (not subject to ERISA). In the case of a 457(b) Top Hat, this would be for a non-governmental IRS tax exempt employer. For more details, I've linked to the IRS site www.irs.gov/retirement-plans/non-governmental-457b-deferred-compensation-plans
@ngocbhoang 5 жыл бұрын
Excellent information. Thank you! Could you comment on the idea of maxing out the 457 instead of 403b first, since it can be withdrawn at any point to maximize pre-tax dollars? What are the disadvantages of that strategy?
@davidn.waldropcfp2260 5 жыл бұрын
Hi Ngoc and thanks for the question. Much of this depends on the person's specific situation and investment options with the 457 and 403(b) plan. If the 403(b) is filled with high cost and long surrender charge variable annuities, you might want to avoid it entirely.
@jnsa9454 5 жыл бұрын
Thanks for the video. My district seems to have VALIC as its only provider for 457. I don't think they are fiduciary. Suggestions for questions I can ask to consider if I do sign up?
@davidn.waldropcfp2260 5 жыл бұрын
I would ask if there are any no-load investment options. Also, be sure to ask if there is a surrender period involved with any of the investment options.
@hahnnguyen6560 Жыл бұрын
I maxed out my contributions for both of them, 403b and 457. I am 53 and I had just started to contribute to these retirement plans.
@davidn.waldropcfp2260 Жыл бұрын
Nice work!
@utahgirl2636 3 жыл бұрын
Thank for information. It is very helpful. I have been putting money to 403 b. I think I have 457 option too. Well... I am really in looking for retirement plans and investment. My employer offers two investors. I can choose either Fidelity and TIAA. I don't know the difference between them. Do you think you can explain. My 401 goes to TIAA anf 403 b goes to Fidelity. I don't know why even I set up separately. Thanks
@davidn.waldropcfp2260 3 жыл бұрын
Hi and thank you for contributing to the conversation. It is common for one employer to use two different providers when there are two different plans i.e 457 and 403b. Both Fidelity and TIAA are very well known and established in the industry. I think you will be fine with either. If you have the option of having both plans at the same provider, you should be fine doing that too. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@Visaliaipa 4 жыл бұрын
I have a couple of questions. I’m late to the game as far as contributing to my 457. I’m 50 (51 this year) and plan in retiring in 4-5 years. I have a defined benefit pension so I didn’t contribute to my 457 early in (I know stupid). I’m currently doing 1000/month and they have a ROTH option as well. Would it better be better to do the ROTH option as well or open a separate EOTH through a brokerage firm or bank etc. and, can I still contribute to a 457 post retirement. I know you can’t do it for a ROTH unless you have qualifying income. We live within our means and my pension will be plenty to live on FYI.
@davidn.waldropcfp2260 4 жыл бұрын
Thank you for your question. Hard to what is better, it really a matter of pros and cons and finding what works best for your situation. I wouldn't be able to answer that thoroughly here. But, utilizing the Roth option within your 457 will allow you to contribute more that current Roth IRA limits. And, there are no income limitations with the 457 as there are with Roth IRAs. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@Nepthu 4 жыл бұрын
Great info! I've been contributing to my 457 plan. I want to increase that contribution by at least 5% this year since I'm not spending money on travel and vacations due to COVID. I figured this would help magnify compound interest even if I have to decrease my contributions again in 2021. You can decrease contributions in the future, correct?
@davidn.waldropcfp2260 4 жыл бұрын
I'm so glad you found this helpful. You can always decrease your contributions. However, you should inquire about how frequently you can do so. For example, some plans only allow changes to your contribution level, twice a year. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@Nepthu 4 жыл бұрын
@@davidn.waldropcfp2260 Thank you, David!
@ambikaadhikaritiwari4747 5 жыл бұрын
My contribution to 403(b) and 457 is pre tax pre tax contribution. Now I knew that it is beneficial to have after tax contribution to these plan. Is it possible to convert both to after tax contribution?
@davidn.waldropcfp2260 5 жыл бұрын
Thank you for your question and apologies for the delayed reply. If your plan(s) allow for after tax contributions (Roth ), then you you should be able to contact your payroll/plan administrator and change your future contributions to after tax (Roth). Converting existing pre tax dollars may be possible if your plan(s) allow it. However, it may not be advisable to do so.
@lekwaloedwards1459 3 жыл бұрын
how do I get hold you for more explanations
@davidn.waldropcfp2260 3 жыл бұрын
Hi lekwalo, you can send an email via this link. www.theastuteadvisor.com/contact-david-waldrop/ Once I receive your email, you can book a consulting call with me.
@josephferras5178 3 жыл бұрын
We have moved from my old job in one state where I had a 457 plan that I contributed to monthly to a new state where I took a new teaching job and for last 2 years have been contributing to my school offered 403B plan monthly. How can I and should i bring my saved money from my former 457 plan into my current 403B plan? Thannks in advance.
@davidn.waldropcfp2260 3 жыл бұрын
Hi Joseph and thank you for the question. The 457 and 403(b) have some different rules that can be more or less beneficial depending on your circumstances. You should proceed with caution if you're attempting to combine the accounts into a 403(b). 457 plans are generally more favorable when it comes to withdrawals and distributions. Moving 457 funds into a 403(b) may not be advantageous to you. If you'd like to go over this in more detail, I recommend scheduling a consulting call with me. This will ensure I have all the facts and puts me in a position to give you a more thorough recommendation. You can reach me through my website www.theastuteadvisor.com.
@samuelballachino9415 4 жыл бұрын
I have a 403 b plan. For 2 years. Should i look into a 457 plan? I also have tiaa. Plan
@davidn.waldropcfp2260 4 жыл бұрын
Hi Samuel, Thank you for the question. Both plans can be used together. The most beneficial aspect of this is the potential to max out both plans and double the amount you could normally sock away. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@baybay7898 3 жыл бұрын
My husband’s retirement plans with TIAA Cref. His company offers three retirement plans- 1)required 403B with employer’s match 2) deferred Annuity (403B supplement), and 3) 457. He has been contributing only the required 403B in the past. Now if we pick both 403b supplement plan & 457 plan, can we contribute $19000 for each? $38000 total? Or just $19000 in total? Please advise. Thank you.
@davidn.waldropcfp2260 3 жыл бұрын
Hi and thank you for the question. These questions require a bit more analysis. I would be happy to schedule some consulting time with you to discuss in more detail. You can contact me through my website www.theastuteadvisor.com. I hope to hear from you.
@rodneyacosido2988 Жыл бұрын
I contributed on 403b with employer matched since 2006 to present. I'm over 60 now going to retire soon. What are the best options? Withdraw all the money and manage by myself by putting into dividend stock. Or rollover to IRA. OR any other best thing to do?
@davidn.waldropcfp2260 Жыл бұрын
I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
@graceychen07 2 жыл бұрын
I’m 45 years old and my 457b govt plan allows me to transfer it to a ROTH. Is it a good idea to do it now or wait until the market crashes? Thanks.
@davidn.waldropcfp2260 2 жыл бұрын
Hi and thank you for the question. There is much more to consider before you convert to a Roth. Not to mention, the comment section isn't the best place for individual advice. If you'd like to book some consulting time with me, I'd be happy to discuss your situation in more detail. You can email me via my website at www.TheAstuteAdvisor.com
@dcasanova26 3 жыл бұрын
If i had to pick one plan, the 403b vs 457, which would you choose? Sounds like the 457 has the edge since you don't receive the 10% penalty for taking money out if before the age of 59.5. Are there any other benefits to a 457 plan and are there any circumstances when a 403b would be preferred over a 457? Also, I am 30 years old making on the lower end of six figures and should qualify for a Roth. Should I first max out the employer's TSA 403b Roth before contributing to the 457b or TSA 403b - Traditional plan? I think it would benefit me to do that first so I have fewer taxes to pay upon retirement. Thank you!
@davidn.waldropcfp2260 3 жыл бұрын
That is a key differentiator for sure. I would look closely at the fees and investment options between the two plans offered. Let me know if you need help with that part and we can schedule a consulting call. You can contact me via my website www.TheAstuteAdvisor.com.
@Shawn-ho6de Жыл бұрын
Also if your employer goes bellyup you are out of luck with your 457 plan. This is unlikely but something you should consider if your employer is a nonprofit or a private school.
@jimb643 3 жыл бұрын
Is it prudent to use contribute to a 403b and or 457 plan when they have such limited investment options and have very high fees?
@davidn.waldropcfp2260 3 жыл бұрын
Hi Jim, thank you for the question. If you want to contribute more than the IRA yearly max of $6,000 and $7,000 for those age 50 or more, then....yes, it is prudent. Despite limited investment options compared to IRAs, there is usually more than enough choices with those plans to build a well allocated and diversified portfolio. Also, not all 403b and 457 plans have "very high fees." It depends on what you're investing in. For example, if you invest in a variable annuity, the fees will be high. However, you should be able to find plenty of other choices via mutual funds with reasonable fees. Unfortunately, you need to look at all the investment options available, not just those a broker is showing you. If you find this helpful, you should download my 2021 Financial Planning Cheat Sheet www.theastuteadvisor.com/2021cheatsheet
@cherrymarquez1772 2 жыл бұрын
I just retired last June and only have a 403b. Should I get a 457 too? if my school offers it? I'm 58. 30 yrs in service.
@davidn.waldropcfp2260 2 жыл бұрын
Hi Cherry, If you're retired, you will likely NOT be eligible to make 457 contributions. Participation rules will often require you to be employed and receiving to be eligible for contributions to these plans. Be sure to consult your own tax and financial professional regarding your specific situation. If you don't have one and would like to work with me, send an email via my website www.TheAstuteAdvisor.com
@andymitchell1721 Жыл бұрын
Can a teacher make max contributions to a 403(b), a DCP (457) AND a Roth? So, max all three out? Thanks!
@deljay1840 Жыл бұрын
Yes
@kcc09kcc 3 жыл бұрын
Hey there what is the recommended amount to start contributing into a 457B plan for a 34 year old?
@davidn.waldropcfp2260 3 жыл бұрын
Hi Kristal, thank you for contributing to the conversation. It's a great question. A rule of thumb is to strive for at least 10% of your pay. If you feel like that would strain your budget, start with a lesser amount and work toward increasing to 10% gradually. Once you reach 10%, increase it each year. The ultimate goal is to hit the IRS limits. Be sure to get my 2020 Financial Planning Cheat Sheet located here www.theastuteadvisor.com/2020cheatsheet
@kcc09kcc 3 жыл бұрын
David N. Waldrop, CFP® thank you 😊
@moniquegodbold6505 2 жыл бұрын
Can you lump sum to a 457 on and off. Example qtrly incentive payout
@aundirussell8644 2 жыл бұрын
this is an interesting question, one i'm wondering too.
@davidn.waldropcfp2260 Жыл бұрын
I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
@SheriffRoscoP Жыл бұрын
I'm over 50 and currently have a 401a, 457b (including Roth 457) and a Roth IRA. I'm also able to contribute up to 10% after-tax to the 401a. What does the $66,000 (for 2023) combined employee and employer contribution limit apply to relative to the options I have available? Can more than $66,000 be contributed in my case?
@davidn.waldropcfp2260 Жыл бұрын
Hi Sheriff! I know exactly which one you're referring to. It was my favorite show as a kid. You might want to access my 2023 Financial Planning Cheat Sheat. It provides some useful numbers regarding plan contribution limits. If that doesn't help, you can schedule a consult with me and we'll look into your situation: www.theastuteadvisor.com/2023cheatsheetLP
@SheriffRoscoP Жыл бұрын
Thanks David and it was my favorite show as well! Appreciate your response and I’ll check out your cheat sheet for retirement contribution limits!
@jrichman21 2 жыл бұрын
Assuming I would only pick 1 - If I am not going to retire before 55, does it make a difference which one I would choose?
@davidn.waldropcfp2260 2 жыл бұрын
That's a really good question. Unfortunately, the anwers is...it depends. Staying away from the high cost/low quality investments often found within 403(b) plans is key. Depending on which investment provider is handling the 457 makes a huge difference too. These are conversations a have regularly with clients. If you'd like to dive a little deeper, use this link to schedule a call with me: app.precisefp.com/w/dgpmij
@susycherian4110 2 жыл бұрын
If someone currently contributes to both 403 b and 457 b . and planning on retiring at 50 from 403 b employment, could that person take the 403 b money to 457?
@davidn.waldropcfp2260 2 жыл бұрын
Hi Susy, thank you for the question. Both 403b and 457 only allow funding via salary deferrals (from your paycheck). If you're referring to rolling over 403(b) funds to the 457, you would have to check with your 457 provider if rollovers are accepted. My clients have found this cheat sheet helpful and it's updated for 2022 www.theastuteadvisor.com/2022cheatsheet
@WillertMorris 3 жыл бұрын
What public employee can comfortably contribute $50,000 pa? Are they earning $500,000?
@davidn.waldropcfp2260 3 жыл бұрын
Hi Willert, thank you for the question. There's no doubt, many people won't be able to hit those limits. However, there are public employees earning well into the six figure range. Add to that a spouse/partner with high income and it becomes much more achievable. It's not just about income level too. Much depends on personal expenses.
@mercantilism954 2 жыл бұрын
How are they different from a saving account? I can deposit money into a saving account as much as I want. I don’t understand the difference.
@davidn.waldropcfp2260 2 жыл бұрын
The main difference is how they are taxed. These plans are tax deferred meaning they reduce your current taxable income. Also, you can invest mutual funds. Very different from savings accounts.
@tristangirod1855 4 жыл бұрын
I plan on retiring early with my Roth 457b plan, from what I understand because its a Roth when I withdraw I shouldn't be hit with any taxes or any fees regardless of my age correct?
@JasonBuckman 4 жыл бұрын
Correct, 457 has no age requirement and Roth has no taxes.
@davidn.waldropcfp2260 4 жыл бұрын
I would be careful with this. I am providing a link to the IRS regarding Designated Roth Accounts within 457, 401(k), and 403(b) plans. I recommend reviewing this prior to implementing your strategy. www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts#Distributions
@tristangirod1855 4 жыл бұрын
David N. Waldrop, CFP® I don’t see anything on that link that would stop me from retiring early with a Roth 457 as long as I’m no longer apart of the company that offered the plan , can you tell me what I’m missing here?
@JasonBuckman 4 жыл бұрын
@@tristangirod1855 Ok, I just looked it up. For Roth 457 withdrawals to be qualified the first contribution had to have been more than five years prior and you must be 59½. If not at age 59½, the earnings will not be subject to any penalties (like an IRA or 401k would), but they will be subject to taxes.
@tristangirod1855 4 жыл бұрын
Thanks guys, so if I wanted to retire early would my best bet is to withdraw my contributions from a Roth IRA ? Cause if my contributions are more then 5 years old I should be able to withdraw them tax and penalty free from a ROTH IRA right ?
@gursua9412 2 жыл бұрын
If you have both 403B and 457 Plan, is the limit 20500 x2 or just 20500 for both?
@hahnnguyen6560 Жыл бұрын
Tt can be times 2, 20,500 for each plan
@davidn.waldropcfp2260 Жыл бұрын
I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
@storymodegamer850 5 жыл бұрын
can I contribute to my 403 and 457 plan and also Roth IRA ?
@davidn.waldropcfp2260 5 жыл бұрын
As long as you are within the Roth IRA income limits set by the IRS you should be fine. I just did a video on Roth IRAs that you might want to check out. kzfaq.info/get/bejne/gaipgMKAmLXRZqM.html
@storymodegamer850 5 жыл бұрын
@@davidn.waldropcfp2260I forgot to mention that my employer is also deducting money from my paycheck for defined benefit plan (DCP)so basically I can have 4 ? DCP , 403 , 457 and Roth IRA , thanks
@greatriffishere 4 жыл бұрын
yes
@Scooterp82 3 жыл бұрын
What does "retirement" mean in this context? Retirement from teaching? What if I get another job or have a side business?
@davidn.waldropcfp2260 3 жыл бұрын
Hi Scott, great question and thanks for contributing to the conversation. Retirement can mean different things for different people. So, in this context, I'm referring to the general idea of putting as much money away as possible for your future years. That way, when you step away from teaching or any other form of work where you no longer receive regular income, you can do whatever you want AND be comfortable.
@Scooterp82 3 жыл бұрын
@@davidn.waldropcfp2260 Ok. I am asking about specifically "retirement". If I quit my w-2 job, specifically teaching, I can get distributions even if I have a side business, such as landlording?
@davidn.waldropcfp2260 3 жыл бұрын
@@Scooterp82 As long as you have separated from service, you should be able to access your retirement funds. What you do after has no impact on that. But, if you are under 59 1/2, you will likely be subject to early withdraw penalties.
@Scooterp82 3 жыл бұрын
@@davidn.waldropcfp2260 but not if I have a 457b plan!
@davidn.waldropcfp2260 3 жыл бұрын
@@Scooterp82 Correct. Early withdrawal penalty applies to 403(b).
@AllinGold2 4 жыл бұрын
"Withdrawal."
@aundirussell8644 2 жыл бұрын
I have a question. I am 51, make 55k a year, and have access to a Roth 403b and a 457. Am I allowed to put 27k into each account, total of 54k? We can live on my husband's income.
@hahnnguyen6560 Жыл бұрын
Yes you can, I am doing exactly that. I am 53 and I am contributing 27K to each account.
@davidn.waldropcfp2260 Жыл бұрын
I’m so sorry I’m seeing this just now. I wasn’t getting the notifications for some reason. I’ve got a lot to reply to. If you download my 2023 Financial Planning Cheat Sheet, I will be able to respond directly via email. Here’s the link: www.theastuteadvisor.com/2023cheatsheetLP
@shu-wenlu5581 3 жыл бұрын
457 (b) plan balance currently contains former 401 dollars that was rolled over. A person is 66 years old now and plan to continue to work after the age of 72. Will that person be required to take RMD amount for the rolled-over 401 portion when that person reach the age 72 and afterwards? Thanks.
@davidn.waldropcfp2260 3 жыл бұрын
Hi Shu-wen and thank you for the question. My understanding is that money rolled into the company retirement plan (401k or 457b) qualifies for the RMD exemption if working beyond 72. However, before you act on that information, consult a tax advisor and the plan administrator to confirm.
@shu-wenlu5581 3 жыл бұрын
@@davidn.waldropcfp2260 Hi David I had contacted my 457b plan administrator and was told the rolled-in 401K portion is not required to take RMD. Thanks for your prompt response and good information.
@davidn.waldropcfp2260 3 жыл бұрын
@@shu-wenlu5581 That's great! Be sure to check out my 2021 Financial Planning Cheat Sheet for more information www.theastuteadvisor.com/2021cheatsheet
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