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OK, I'm not the sharpest tool in the shed when it comes to these things so here's what I need help on.
Currently the Company I work for has a 457 plan that matchs dollar for dollar what I put into it, up the federal limit up to @15k ( I do max it out) They are planning on changeing that to a 401A plan. Can you folks help me understand the difference and the pros or cons??
Thanks in advance..
Todd
In my experience, a 401K plan is for private business', and a 457B is for goverment business'. They are pretty much the same thing. I worked for a City Goverment, and we had 457b. My wife worked for a no goverment company and had a 401k. The are the same.
The one difference I know of is, with a 457b you are allowed to play catch-up, which you can't with a 401k. Catch-uo is a rule that when you reach age 55, you can double your amount invested for five years to make up for some of the years you couldn't afford to put in the max. Lots of people raising families and buying a house don't have a lot of money at the younger age, so they allow you to play catch up. 401k doesn't allow that. For five years I was allowed to put in $30 K, which really made a difference in retirement. Anothr thing I was able to do is, I planned my retirement for Jan 2nd. The company owed me over $0k in vacation pay and sick leave. IBy staying untim Jan, I was able to puit $20k of that money into that years deferred comp, cheating the gove out of that much tax. Wife wasn't allowed to do that, either, so I perfer the 547b plan
Location: When the people find that they can vote themselves money, that will herald the end of the republic
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Quote:
Originally Posted by Donn2390
The one difference I know of is, with a 457b you are allowed to play catch-up, which you can't with a 401k. Catch-uo is a rule that when you reach age 55, you can double your amount invested for five years to make up for some of the years you couldn't afford to put in the max.
I don't know about 457b plan but with 401k plan employees over the age of 50 allowed to put up to $5000 in "catch-up" contribution above $15,500 allowed on pretax basis.
I don't know about 457b plan but with 401k plan employees over the age of 50 allowed to put up to $5000 in "catch-up" contribution above $15,500 allowed on pretax basis.
Not saying your wrong, because I'm certainly no authority on it, BUT MY WIFE TRIED TO DO THAT AND WAS TOLD SHE COULDN'T. mAYBE IT DEPENDS ON THE COMPANY, OR MAYBE THE RULES CHANGED.
OOps, didn't mean to yell.. Anyway, I hope you're right, it's a great benifit
Well, the OP asked about a 401A plan, which, as I understand it, has a big difference in that only the employer can fund it--employee contributions are not allowed. This could possibly push you into a higher tax bracket as well, since you'll now have more taxable income.
As for the catch-up provisions, both the 401k and the 457 have the "extra $5000 at age 50" provision, and the 457 also has the provision described by Donn, which is different.
In my experience, a 401K plan is for private business', and a 457B is for goverment business'. They are pretty much the same thing. I worked for a City Goverment, and we had 457b. My wife worked for a no goverment company and had a 401k. The are the same.
The one difference I know of is, with a 457b you are allowed to play catch-up, which you can't with a 401k. Catch-uo is a rule that when you reach age 55, you can double your amount invested for five years to make up for some of the years you couldn't afford to put in the max. Lots of people raising families and buying a house don't have a lot of money at the younger age, so they allow you to play catch up. 401k doesn't allow that. For five years I was allowed to put in $30 K, which really made a difference in retirement. Anothr thing I was able to do is, I planned my retirement for Jan 2nd. The company owed me over $0k in vacation pay and sick leave. IBy staying untim Jan, I was able to puit $20k of that money into that years deferred comp, cheating the gove out of that much tax. Wife wasn't allowed to do that, either, so I perfer the 547b plan
Thats what I was reading too. Funny because I work for a Municipal Power Agency and we get state retirement (PERA) as well as the 457....
I worked for City Goverment in California and we had a 457 and PERS retirement. PERS is most likely the same as your PERA. The 457 was funded by money I put in. The PERS retirement was a company funded retirement. Very few companies still fund employee retirement funds, so the employee must save for themselves. Even the City I worked for cut out many of those benefits for new hires years ago.
I looked into 401k catch-up and discovered they do it now. I don't know if my wife was lied to, or the rule came about later.
I have two separate 457 plans from employment with a city and from state employment. The main advantage I see from a 457 is that once you terminate employment then you can access money from that account without penalties if you have not achieved age 59.5. I know my current plan has catchup provisions and also the ability to defer an additional 5k per year once you hit age 50. Plans may differ from employer to employer so you need to research the plan rules from who ever administers the plan. Likewise, the variety of investment options will also vary from plan to plan. Overall, I have been pretty satisfied with choices in my 457's and they offer me greater flexibility should I decide to retire early. Beware that you may be allowed to roll over 457 funds into other different retirement plans, but then you may also be subject to more stringent withdrawal rules and penalties.
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so here's what I need help on.
