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How to pronounce 457 in English?

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what is a 457b plan what are the
advantages disadvantages and how do you
invest in it to build a large amount of
wealth
a 457b is very similar to a 401k
usually 401ks are offered in a private
sector
and a 457b is offered for government
employees
or not-for-profit employees whether it
be a 401k
or 457b 403b tsp
ira they generally all do the exact
same thing they're there for you to
invest in your retirement
and get a ton of tax benefits for doing
so first question
is there an income requirement in order
to be eligible to contribute
to a 457b unlike a roth ira
that has income limits there is no
income limits for a 457b if your
employer offers a 457b
you are eligible to contribute to it as
of 2021 the contribution limit is 19
500 that you can put into your own 457b
or if you're age 50 and older you can do
what's called catch-up contributions
where you can contribute up to 26 000
into your 457. i don't want to confuse
you but i
will tell you this it does say in the
irs code that you can contribute
double the 19 hundred so thirty nine
thousand dollars
the last three years before you retire
you can keep that in mind i doubt that
people are gonna be in position to do
that and i don't really
see people doing that often but it is
there if you wanna do a super
catch-up why should you contribute to
your 457b
the big thing is going to be it has
awesome
tax advantages and you're going to be
able to take advantage of what's called
compound interest
for example let's say you maxed out your
457
every year for 25 years that you worked
for your employer
if that account got the average rate of
return
that the stock market or the s p 500 got
which is around 11
you would retire after 25 years with
over 2.5 million dollars
in your 457 plan when do you start
contributing to your 457 plan as soon as
possible i've never heard of anyone
complaining
that they started saving for retirement
too early but i do hear
the majority of people saying they wish
they had started earlier
so let this be your earlier start right
now watch this video
understand your plan and start investing
in it don't put it off and if you can do
more
do more can you combine a 457 plan
with another retirement account yes you
can
a 457 can be combined with a 401k
a 403b or an ira so if you want to do a
457 plan with your employer
that's great and if you want to do a
roth ira in addition
that's great too anyone can open up an
ira account
and the chance that your employer offers
a 457b
and a 401k or a 457b and a 403b
you can max both of them out so you can
do 19500 in your 457
and you can do 19500 and your 403b
and if you want you can do six thousand
dollars in your roth ira
will you get an employer match when you
contribute to your 457
so this is a popular benefit with a 401k
is usually there's an employer match
like three percent or five percent or up
to five thousand dollars
some 457 plans offer a match it's
dependent on your employer
but the majority of them do not and the
reason for this is typically
people that are offered a 457 plan or a
deferred comp plan
it's in addition to a pension that
they're going to receive
and so the match from your employer is
usually all focused in on the pension
and not the 457 that's just something
extra that you should be taking
advantage of
should you do a traditional or a roth
457 traditional means you're going to
contribute before taxes
and when you retire that's when you're
going to owe the taxes so you're going
to save money on taxes now with
traditional
roth means you're going to pay the taxes
now and not pay any taxes when you
retire
if you think you're going to retire
better off making more money in
retirement
than you are right now while you're
working
then it would be better to do a roth 457
if you think you're going to retire
worse off
you're going to make less in retirement
income than you do in income right now
then it would be better for you to do a
traditional 457.
keep in mind your pension or any social
security benefits you may receive
that all gets added together for your
total income
during retirement i have a couple videos
on the difference between traditional
and roth accounts i will link them down
below in the description so you can
watch those
when can you withdraw from your 457 plan
so this is actually a huge advantage
unlike the 401k
you have to wait to age 59 and a half
before you can withdraw it
or you get hit with a 10 penalty with a
457 plan
you're not penalized for withdrawing it
as soon as you retire
as soon as you leave your employer it
doesn't matter what age you are
you can start withdrawing from your 457
plan so say you retire early at age 52
as soon as you're 52 and you leave your
employer
that same month you can start
withdrawing from your 457 plan you will
not pay any penalties
but you will pay income taxes so if you
have a traditional 457
plan it doesn't matter you're going to
pay taxes on it no matter what age you
were
if you have a roth 457 plan
you will not be subject to the penalty
but you will be subject to taxes which
the whole reason you did the roth plan
is so you didn't have to pay taxes later
on
so if you have a roth 457 plan i do not
advise that you would
start withdrawing it as soon as you
leave your employer
that in order to get the tax benefit on
a roth
457 plan you're gonna have to wait to
the age 59 and a half like you would
with a raw 401k
or a roth ira but if you have a
traditional 457 plan
and you need the money before age 59 and
a half go ahead you can start
withdrawing from it
how much should you withdraw from your
457 plan when you retire
as little as you need is is the best
answer so if you can live off your
pension and social security and
withdraw as little as possible from the
457 plan
that's great because your 457 plan is
going to continue to grow that lump sum
the 2.5 million that we talked about in
the beginning of the video
that'll continue to compound and grow
the less you touch it but typically if
you need the money to live off of
i would withdraw around six percent of
your 457 plan
you can't withdraw everything that your
457
makes you have to be able to absorb the
things like inflation
and the roller coaster ride of the stock
market so instead you would draw six
percent
to leave some buffer room how much do
you need in your 457 plan to retire
well it really all depends on how much
expenses you're going to have in
retirement however
a good goal to set for you would be
divide your
salary by .06 and whatever that equals
would be a good
goal to have in mind that you should
save in your 457
before you retire can you borrow money
from your 457 plan
yes you can borrow money you can take
out a loan against your 457 plan as long
as the company that your employer works
with allows it which most do
obviously this is a loan so you're gonna
owe back
the amount of money you took out plus
interest
so i would not recommend you do it
because you're gonna penalize yourself
in the interest that you pay
and if you end up having to get fired or
leave your employer
typically you're gonna owe the loan back
immediately
the last and most important thing is the
investing
how do you invest and what do you invest
in within your 457 plan
so to set a 457 account up
check with your employer either email
your hr or just ask
some person that you work with hey what
company do we use
go to the website login create an
account with that company it probably
takes less than five minutes
once you have an account created you're
gonna go in and be able to pick
the amount of money you want withheld
from your paycheck
usually you can pick either a percentage
of your paycheck
say 15 of every paycheck goes into your
deferred comp
or you can choose a dollar amount say
300
every paycheck goes into your deferred
comp that doesn't mean it's invested yet
you're not technically investing in a
457
a 457 is just the account the vehicle
from which you can then invest so your
457
plan is going to have a bunch of
different options for you to choose from
typically they're going to have a bunch
of different life funds they're going to
be called something like the 2050 funds
the 2060 fund the 2055
fund and then it may have a bond or two
that you can invest in
and then it'll have maybe a dozen mutual
funds that you can choose from
vanguard mutual funds are very popular
sometimes
your employer will have two or three or
four different
vanguard mutual funds that you can
choose from so how do you pick which one
what i would do
is every single company has to list
the rate of returns that these funds are
making
so find the list and compare the 10-year
rate of returns for every single
different option you can choose from i
would aim to outpace the s p
500 which does about 11 a year so i'm
looking for things that over the last 10
years have done
at least 11 percent hopefully 12 percent
or more once i find
two or three of those that are doing 12
or better
that's what i'm gonna invest in now it
will ask you how much do you want to
contribute
into each fund so if you're investing in
three funds one thing you can do is just
split it equally
among the three funds so invest 33
percent in this one
33 percent in that one and 33 and the
third one
if you have any questions whatsoever
about the 457 plan
go ahead and comment them down below you
can tell me as much or as little about
your situation as you want and i
will answer them to the best i possibly
can
one last tip that i want you to keep in
mind is you are
eligible to roll over your 457 plan when
you leave your employer so if you go to
a new employer you could roll over your
457 plan to your new employer's 401k
or 457 or the best thing to do would be
to roll it over
to your own ira you can roll a
traditional 457
into a traditional or rollover ira and
you can
roll over your roth 457 funds
into a roth ira keep in mind though if
you do want to retire
early before age 59 and a half and
you're hoping to access your 457 like we
talked about
you're not going to be able to do that
as soon as you roll it over into an ira
you have to keep it in a 457 but if you
don't plan on touching anything until
you're 59 and a half
the best thing to do is roll it over to
an ira because in ira
you're going to have more control over
it there's a lot better options to
choose from
there's a lot more investment options to
choose from
and it's usually easier to use you can
have all your investments
in the same centralized place thanks for
watching guys go ahead hit the like
button
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through things like a 457 plan i post
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you guys next week

what is a 457b plan what are the

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How to pronounce 457 in English?

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