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Dan Otter

The 457(b) Commandments

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The 403(b) Commandments (http://www.403bwise.com/features/403bcommandments.html) were so well received that we created The 457(b) Commandments--which are very similar. We've pasted them below or you can also access them at: http://www.457bwise.com/features/457bcommandments.html


The 457(b) Commandments

In many ways the 457(b) can be quite complex — where to invest, how to invest, how to start, etc. But in many ways it can be quite simple if you follow The 457(b) Commandments.


Commandment 1. Thou Shall Start Early

The sooner one starts investing in a 457(b) the more one should accumulate. By the same token it is never too late to start.


Commandment 2. Thou Shall Invest with Quality Companies

You can't control the market, but you can control who you invest with. Two great places to research investment companies are: Morningstar and Motley Fool. If your employer has less than terrific investment options lobby them to add better companies.


Commandment 3. Thou Shall Know All Fees and Surrender Charges

Some companies go to great lengths to bury fees and surrender charges. Avoid these companies. The best time to unearth fees and surrender charges is before you invest. Dig. Dig. Dig. Ask a lot of questions. And read thy prospectus, which is the legal document spelling out an investment's terms, objectives and other relative information. These can be boring and hard to read, but they will empower your decision making. You can't control the market, but you can control how much you pay for investments.


Commandment 4. Thou Shall Diversify Investments

Studies indicate that more than 90 percent of your portfolio's long-term return is the result of asset allocation — the process of distributing your investments across various asset classes in an attempt to moderate the inevitable ups and downs of your portfolio. See: Allocate Investments Wisely for more information.


Commandment 5. Thou Shall Increase 457(b) Contribution Annually

Got a pay raise? Congratulations. Now divert a percentage into your 457(b) immediately if not sooner. Didn't get a pay raise? Sorry. Still increase your 457(b) — even if it's just by $25.


Commandment 6. Thou Shall Take Advantage of Employer Match

If you are fortunate enough to work for an employer that will match your 457(b) contributions show your appreciation but taking advantage of this generous perk. Some employers will offer a 25 cents to 50 cents match for every dollar an employee contributes to a 457(b). For example, if you contribute $1,000 this would mean that they would contribute $250 to $500.


Commandment 7. Thou Shall Take a Long Term View

The 457(b) is a retirement plan. Retirement for most of us is pretty far off. If you have followed the first Six Commandments don't obsess daily about your 457(b).


Commandment 8. Thou Shall Have Entire Financial House in Order

We love the 457(b) and you should too. But it should be only one part of your financial plan. Do you have credit card debt? Make a plan to pay this off. Do you have enough insurance — life, disability, long-term care, property, casualty, auto? Do you have a Will, trust and Power of Attorney? There is no shame in hiring a professional to help with these critical policies and documents.


Commandment 9. Thou Shall Continue to Educate Oneself

It would be great if retirement plan rules and investment information never changed. Sadly they do. Often. One needs to stay abreast of the latest developments. We will do our best to help in this department.


Commandment 10. Thou Shall Share Knowledge With Colleagues

Go forth and share your knowledge with co-workers and friends.



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