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mqkudy

457 b pre-tax or roth?

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Hello everyone, I'm new here. My third party company at my school district recently changed. With that, came some positive changes for me. One is that I previously wasn't able to contribute to a 457. Now we have one. Not only that, but I can pick between the Roth or pre-tax. My vendor for the 457 b is Encompass. As far as my situation, I am almost 53. Have been teaching in CA for 25 years. I will retire in 6 1/2 years, 2025. I currently make $104,000. I also have a 403 b. I will continue contributing into that, and have Vanguard as an option which is awesome. My questions are:

1) Encompass? I can't find anything about them. Has anyone heard of them? How are the investment option, fees, etc.

2) With my new company, I can now pick either the pre tax or roth in both my 457 b and my 403 b. I am curious what everyone thinks would be best?

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mqkudy, welcome to the forum! I have not run across Encompass as a 457 (or 403b) provider. I think you will have to do the footwork and find out the answers to your questions from Encompass. You are asking the right questions. Now that your district has its first 457 provider, it may be relatively easy for you to get a second vendor added (if Encompass turns out to be high-cost). The CalSTRS pension authority offers a moderately low-cost 457 call Pension2. Because the CA teachers pension authority runs Pension2 457, there should be little resistance by the district or the TPA is adding it to the vendor list. Also if Fidelity is on your district's 403b vendor list, they also offer the lowest cost 457 plan I've seen. 

I don't think we know enough about you to make an intelligent guess at Roth vs traditional 403b and 457 contributions. It would help if you answered these questions:

1. single or MFJ?

2. income tax bracket now? It's based on "taxable income" on line 43 of your 1040 tax return.

3. expected income tax bracket in retirement? 

4. Are you contributing to a Roth IRA? 

 

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Thanks for getting back to me!

1. Single

2. 22% tax bracket - although within $2000 of the next tax bracket.

3. Still 22% tax bracket at retirement - much to my surprise after just checking.

4. I do not contribute to a Roth IRA right now.

Thanks again so much!

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If you expect to stay in the 22% bracket in retirement, it may be a tossup on traditional vs Roth on your 403b and 457. Are you maxing the Vanguard 403b, including the over 50 catchup? I would do that and also max a Roth IRA before use the 457. If your income is too high to contribute directly to a Roth IRA, it’s possible to use a “backdoor Roth” contribution process. If you can use a low-cost 457, you might split it traditional/Roth? 

Please tell us what you find out about Encompass. And let us know how it goes on adding other providers.

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