457 vs. Roth IRA
I have a client who is 63 and she is contributing $200 a month into a 457 with a state employer. What are the advantages of a 457 versus a Roth IRA? In other words, should she keep contributing the $200 to the 457 or should she start contributing it into a Roth?
Permalink Submitted by Alan - IRA critic on Mon, 2017-04-24 18:25
A Roth 457 is more comparable to a Roth IRA than a pre tax 457 since both Roth accounts are funded with after tax money. Generally, a client would elect a pre tax contribution if their current tax rate is higher than what is expected in retirement. A Roth contribution is preferable if their current tax rate is lower or sometimes around the same as expected in retirement. If the comparison is between a Roth 457 and a Roth IRA, the Roth IRA should be maxed out first assuming there is no match made for the 457 contributions.