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A letter came from the benefits office yesterday explaining I am now eligible for a 457 (b) Deferred Compensation Plan, in addition to the 403 (b), the non-profit/public institution equivalent of a 401k.

The upshot of this is a doubling of the deferred income I can put away for retirement. (I put out an inquiry to our tax gurus, but I'm almost certain this is true, or as the only reply I've gotten so far says, "Yes, Virginia, there is a Santa Claus.") Bottom line is an additional $14,00 deferred next year for someone over 50 ($11000 for the young and restless), as well as the increased deferral limits for 403 (b)/401 (k), reaching $20,000 in 2006.

There also seems to be something for Private Institutions, though what I read from TIAA-Cref makes it sound like it is only available for executives (Charlie, you can go ahead and have a working-class fit).

(If you scroll down on this TIAA-Cref page, you can find links to both public and private 457 plans)

This came out of the blue—I had no idea. I don't know how many others of you out there are eligible.

To a large extent it solves my "fixed-income" problem. In the 403 (b), I had settled for TIAA-Traditional, the "guaranteed" fund, with mostly bond holdings and no fluctuating NAV, with slightly lower historical returns than the Cref bond fund (with the idea of, maybe, switching some or all into the bond fund if interest rates go up). I can now do the same with another $14,000, soon $20,000.

It definitely means I no longer need to think about US Savings bonds, because the amount of cash/bonds we will have in the taxable account to get us from initial retirement/slow-down to age 70.5 will be reduced enough that the likelihood of having much left over is much less, and it will take a long time for the tax advantages of US Savings bonds to make up for lower returns.

As I said, I don't understand to whom 457 (b) applies, but check it out.
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