401(k) vs. 457: Which One Is Better?
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This is what l needed to know
Nicely explained
woah! I didn't realize the cap contribution for 401k was separate from 457's! Awesome and informative video as always!
The 457 all day everyday and twice on Sunday.
Brian…its "Firefighter" and "police officer". Lol
A large part of the decision depends on the quality of vendor and investment options for each too though. While school districts often have dozens of 403b options, they typically have few 457b options. For example, a Vanguard Roth 403b with avg exp ratio of 0.09% vs. a TCG Administrators Pre-Tax 457b with avg exp ratio of 1%-1.5% for the essentially the same Target retirement fund would make me favor the Vanguard 403b. But if you have a good option for a 457b with low fees, then definitely nice to have that early withdraw option!
There are many rules to 457 which are sometimes a bit esoteric. 457(b) comes in 2 types, government and non-government. Non-government 457(b) plans are deferred compensation. This money is at risk. This means that if the entity gets sued or goes into bankruptcy, you have no protection.
The key line from the IRS I can show you about non-governmental 457(b) is this:
Non-governmental 457 plans must remain unfunded. Plan assets are not held in trust for employees, but remain the property of the employer (available to its general creditors in the event of litigation or bankruptcy).
Thank you for explaining. I never understood why contributions to both could be maxed out. Both are deferred compensation. Firefighters and police retire earlier because the jobs are dangerous and the physical demands require strength, flexibility, and youth. A person with aging joints and disk bulges can’t perform the same feats.
The 457B is most certainly BETTER just on the lack of 10% penalty if withdrawn before 59 and a half. I have one and love it!!
You know these guys are really on top of their game because they know what a 457 is!