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403b, And 457 Or 457 And 401k?


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#1 MJ23

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Posted 02 October 2006 - 07:47 PM

My husband and I are presenlty New York City public school teachers. We have both been investing in the 403B plan for 8 years. We have done some research and now realize the 401K plan and the 457 are also available to NYC teachers. So right now we are deciding if it is worth it to invest into two of these plans. We were thinking about investing our money in both the 403B plan and the 457, or the 401K and the 457. Does anyone have any comments on which combination would be best? OR maybe it would be best to pick just one of the retiremnt plans(401k or 403b or 457) and invest in an IRA. Any advice would be greatly appreciated.
Thanks. :-)

#2 Readingteacherspouse

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Posted 02 October 2006 - 09:59 PM

Hi MJ23-

In this community we emphasize low fee investing. I recommend you look at the documents for all three options (403b, 457, and 401k) and find out which vendors charge the lowest fees to set up and maintain and account. Then you need to look at the investment options and those fees. Avoid insurance company vendors marketing annuities (403b(1) plans) as these are high fee. Compare 403b(7) plans to the 457 and 401k plans.

I recently replyed to a similar query from a nurse married to an FDNY employee as follows:

"Because you have more options with your husband's FDNY salary and benefits, you have a more complicated retirement investment situation. Please allow me to make some suggestions. The Hanys 403b and the FDNY 457 and FDNY 401K are about the same for tax advantages. That similarity is that your taxable income will be reduced by the amount you contribute to 1, 2, or all 3 plans. Under current tax regs you can contribute $15K per year to each of these from deferring your current income.

- First, decide how much total you and your spouse will defer for a full year. (I'm going to assume $25K!)

- Second, assess all of the fees for the Hanys 403b, FDNY 457 and FDNY 401k. (This community can help with your assessment, if you wish.)

- Third, set up your salary deferral contributions to have $15K go to the lowest fee plan.

- Fourth, set up your salary deferral for $10K to the next lowest fee plan.

- Fifth, choose an allocation between the various financial vehicles in each plan and direct the custodians to invest your salary deferral contributions accordingly. (Again, the community here can help.)

Because you have all of these salary deferral options, I would invest there first before going with a Roth IRA. When you have more income and have maxed out all your salary deferral options, then I would go to the Roth IRA for more retirement savings. Under current law, your maximum deferral per 401k, 403b or 457 plan goes up to $20K/year when the income earner reaches age 50.

While I am trying to make this investment recipe simple, there is at least one more consideration. If you intend to help your children with college expenses there are a number of tax advantaged savings alternatives to consider. If you want to go down this road we can continue to dialog."

My advice for you tracks this previous advice.

Best wishes,

Readingteacherspouse

#3 Guest_Sierra_*

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Posted 03 October 2006 - 08:07 AM

QUOTE(MJ23 @ Oct 2 2006, 08:47 PM) View Post

My husband and I are presenlty New York City public school teachers. We have both been investing in the 403B plan for 8 years. We have done some research and now realize the 401K plan and the 457 are also available to NYC teachers. So right now we are deciding if it is worth it to invest into two of these plans. We were thinking about investing our money in both the 403B plan and the 457, or the 401K and the 457. Does anyone have any comments on which combination would be best? OR maybe it would be best to pick just one of the retiremnt plans(401k or 403b or 457) and invest in an IRA. Any advice would be greatly appreciated.
Thanks. :-)


MJ 23: You may download the respective websites at: www.trs.nyc.ny.us and www.nyc.gov/deferredcomp.
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