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AndyMac

Retirement in sight and transferring 403b into 457

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Many considerations for Mr. Teacher who plans on retiring within 5 years, (at 60 with 80% pension). Many financial changes require repositioning of funds. Would you suggest Mr. Teacher stop paying into 403B and invest as close to maximum into 457 for last few years of investments while employed?

Thanks for considering my inquiry,

Andy

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I think the answer to your question depends on whether your 403b and 457b are both with low-cost vendors. If they are, even if you sure you will continue until you are 60, it might be good insurance, just in case. After age 59.5, the 457b looses its advantage over the 403b. It's usually best to roll both the 403b and 457b into an IRA after you retire after 59.5. The 457b does have an advantage over the 403b during the last 3 years before the age of "normal retirement". You can contribute double the usual amount. If that is something you might want to do, then switching your contributions to a low-cost 457b makes sense. Paying somewhat higher fees for a few years is not as damaging as it is for longer periods.

Your title implies that you are considering transferring your 403b account into the 457b account. You probably know that's not possible if they are both with your current employer. I'm guessing you meant changing your contributions?

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