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Subject:  401k vs. 457 Date:  5/21/2002  11:18 AM
Author:  moiless Number:  34572 of 103294

Until the 2001 tax changes, IMO the 401k plan was superior to the 457 plan when you could choose between the two plans. With the 2001 changes, the 457 plan now looks slightly better. The contribution limits were raised to match 401ks. You can now rollover the money in the account to other retirement plans. The big difference between the 457 and 401k plan is that there is no 10% penalty for early withdrawls in the 457 plan.

I know you can contribute to both the 457 and 401k plans. It would be nice to have that much spare cash lying around. The Roth IRA is funded. So if your finances only allow one plan to be funded, which plan would you choose? Is there any disadvantages to using the 457 over the 401k? In this case, the fees are comparible between the plans. The 457 has better investment options.

Another question: Should I rollover the current 401k plan into the 457? I do understand the money rolled from the 401k to the 457 retain the 10% penalty if withdrawn before 59 1/2.

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