Background information ...

I am an employee for the state of Nevada. I can start either one of these plans, but there will be no matching funds. (If I do a 457, my funds will not be touchable if the state somehow goes belly up.) Current plans are to stay employed by the state for at least the next several years. (The private sector or the county might pay more, but the state offers great benefits.)

Current retirement planning: On track to make the max contribution to my roth IRA. In 2 more years I will be vested in the state retirement plan (in Nevada, if you're a state employee, you don't pay SS. Money is put into the state retirement plan instead.)

Current debts: Other than my mortgage, none.

I've met the Valic agent here in town. I've been to their website. They have a nice selection of mutual funds, bond funds, and even some index funds. All of these funds are no-load.

At this point in time I can afford to invest $150/mo. (I plan to up this a little bit every year.) I plan to be working at least 30 more years.

So ... (drumroll please)

Which kind of retirement plan would you start and why?

Hi TM!

When you are deciding what to do, check out what the fees are in your plan. Valic funds may be no-load but they do have an annual fee as a percentage of your assets. If that fee is out of line then you might be better off in a taxable account!

Do you have an IRA? Generally those are preferable to 4** plans when there's no matching.

I have an IRA and it is on track to max out. I'm just looking to sock away more money.

I plan to investigate all my options regarding funds and fees, and I will check out the other two places the university has a deal with: TIAA-CREF and Fidelity. I warned Valic's rep that I am not looking to sign any papers until at least August, which should give me plenty of time to investigate their offerings. I also plan to call Fidelity and TIAA-CREF and arrange meetings with their local reps.

As for Valic, if I go with them there won't be an annual fee as long as I keep employed by the university. The U does not match funds, but it will pay the fees and her commission. (If I leave the U, there is only a fee if I keep adding money to the account.)

I'm looking at Valic, because they offer a 457 plan, and they have a large variety of funds I can investigate.

At this point, I'm just trying to decide what is better for me, a 403 or a 457.

As for Valic, if I go with them there won't be an annual fee as long as I keep employed by the university.

Maybe not an annual fee, but look for the "expense ratio" or "investment advisory fees" or "expenses" (or similar wording) expressed as a percentage of the account that is used for paying the manager and expenses of the investments in that instrument. If this is a variable annuity offering inside the 403(b) or 457, check also the "M&E Fees" and whether they are included in the "expense ratio" or are in addition to them.

Disclaimer: my 403(b) is with TIAA-CREF, specifically in their Equity Index Account (0.36% expense ratio), Bond Market (0.38% expense ratio), and Real Estate (0.64% expense ratio). (These expense ratios include the 0.005% M&E Fees.) Before my 403(b) was with TIAA-CREF, my account was with a different company that had huge expenses, e.g., their large cap growth was 1.50% annual "investment advisory fee" plus 1.05% M&E Fee, making their expenses for that annuity account seven times more expensive than TIAA-CREF's Equity Index account.

Based on the kinds of answers I keep getting -- ones that don't answer the question I've asked, but talk about other issues -- neither plan offers me a signficant advantage.

I'm not talking about which of the 3 preferred brokers I'm going to choose yet. I'm not talking about which funds I'm going to choose yet. That decision won't be made until August at the earliest.

I'm just trying to see if anybody knows if there is a compelling reason why I should do one and not the other, given my current financial situation. Am I overlooking something?

A 457 gives you the ability to withdraw the money with no penalty (just tax) when you leave your job. This is because the 457 is not considered a "qualified retirement plan".

http://www.fool.com/retirement/retireeport/2001/retireeport011008.htm - be sure to scroll down to where it talks about 2002.

The 457 plan assets of tax-exempt employers are subject to the claims of the employer's creditors, but those of plans sponsored by governmental entities are not.
...
Beginning in 2002, someone who participates in both a 457 plan and a 401(k)/403(b) plan may make a maximum contribution to both plans without having to reduce the 457 plan contribution.
...
in some ways these plans have now become a better retirement tool than their 401(k) and 403(b) cousins

This may help:

I'm employed by a school district in California which offers both the 403(b) and 457 plans. Based on information available to me at this time, the 457 looks like the superior plan.

1) Assets accumulated in the 457 plan (offered only by the California Public Employees Retirement System - a state agency) may be converted to additional years service credit. The conversion rate has not been made available as yet since the governor just signed the bill that would bring the California statutes in compliance with the new Federal statutes. If the conversion rate is equivalent to the current rate of contribution for a years credit, then 7% of my annual salary should buy me an additional year of service credit, upping my monthly retirement check by 2.5%. Using your example of 30 years until retirement would allow you to build your pension check to 75% of your last paycheck. By converting assets equal to 70% of your final years pay, you would be able to boost your monthly check to 100% of your last paycheck (and maybe still have assets left over for "play money"). In effect, what you are doing is annuitizing a portion of your assets, guaranteeing the additional amount in your monthly check for the rest of your life, independent of the financial markets. And the (so far hypothetical) conversion rate tops anything I've seen with any other annuity.

2) I've been told that 457 plans now allow a maximum "catch-up" contribution (for those of us over 50 or within 3 years of retirement) of $22,000 while the 403(b) only allows a current maximum of $15,000.

3) Our 403(b) currently has over 120 companies offering mutual funds and/or annuities. However, each company only has a limited number of choices and we can only split up our monthly contribution amoung a maximum of 3 offering companies. The CALPERS 457 plan has a Self Managed Account option through State Street Brokerage in Boston which allows us to invest in any instrument available through State Street. And this encompasses just about anything avaliable anywhere.

So in California, my choice is clearly the CALPERS 457 plan. Item (2) should be the same in Nevada but (1) and (3) you will have to check out what you can do in your own situation.