403b vs. 457b
Hi,
I’m a special education teacher and I’ve been reading about IRAs recently. I’m 37 years old and I do not have any other type of investment plan aside from the teacher’s pension fund / Teacher Retirement System (TRS) in Texas (https://www.trs.texas.gov/Pages/Homepage.aspx). I was wondering if you can help me decide which plan would be better for me, a 403b Roth or pre-tax option or 457b Roth or pre-tax option Both are under TCG https://tcgservices.com/.
I understand the difference between the two, meaning that the 403b will have to be kept until 59 and 1/2 and I can take out the money in the 457b anytime without the 10% penalty; however, I’m weighing the options b/c the 457 does carry a 1.25% asset fee per year and the 403b vendors (like Vanguard, etc.) have a variety of fees. What should I do to help me decide which plan is best for me if I want to maximize my contribution limit every year? I am married and I have 4 kids. We do not have any debt and our house is paid off. My husband has a 401k pretax that he contributes to and has about 200K in it so far.
Sincerely
TK
Permalink Submitted by Bruce Steiner on Mon, 2021-02-15 02:39
1.25% is a large amount to pay. You said Vanguard was one of the 403(b) choices. Their fees should be much less. There may be others with lower costs as well.
Permalink Submitted by Alan - IRA critic on Mon, 2021-02-15 18:28
457b plans do not permit in service distributions prior to 59.5, and it used to be higher before the Secure Act was passed in late 2019. So he would have to separate from service before that age to tap the penalty free 457b.
Case of the Week: New In-Service Distributions from 457(b) Plans | National Association of Plan Advisors (napa-net.org)