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|Subject: Re: 403 or 457?||Date: 5/21/2002 3:23 PM|
|Author: brwhiz||Number: 34583 of 82004|
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.
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