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Deciding on benefits and advice needed.

October 7th, 2015 at 07:26 am

I am reaching the point where I have to make a decision about my benefits at the university. I have the option of 3 retirement accounts-I can choose all 3 or none or a combination.

The first is the standard university one. The university will contribute 4% of my pay and will match up to another 4% of my own contributions. Downside is I am not vested until I've been here 3 years and I am almost positive I don't want to be here that long.

Second one is Tax Deferred Account (TDA) in a 403(b) with a recommended 5% contribution. I am 100% vested immediately. I chose to up it to 10% which will be approximately $56 a paycheck. It's not going to make me rich but it will help come tax time.

The last one is a 457(b) plan. Again, I am immediately 100% vested. I can't decide if I should save here as well. I am not planning on staying here forever and I do want to use this paycheck to pay down debt.

Advice? I think I am going to forgo contributing to the 457(b) but my mind can be changed...

Pre tax my paychecks will be 564. I'll have $56 taken out for the 403b, $65 in extra fed and state withholding and approximately $84 out in regular taxes. That leaves $358, which will go a long way towards the renovation costs.

4 Responses to “Deciding on benefits and advice needed.”

  1. AnotherReader Says:

    Both the 457 and the 403 will reduce taxes and can be rolled over into IRA's on separation from employment. The 457 plans have pluses and minuses. If the university is public and run by a government agency, the 457 plan assets are held in trust and cannot be seized by the university's creditors in a bankruptcy. If your employer is a private entity, the 457 plan assets are considered the property of the employer and could be seized in a bankruptcy of the university.

    However, money in a 457 plan is accessible before age 59.5 without paying the 10 percent penalty you would pay for taking early distributions from a 401k, 403b, or an IRA. That makes these plans useful for early retirees.

    Often, it boils down to the investment options offered. If high fee annuities are the only options. you may want to skip investing. If you have reasonable mutual fund choices, you can reduce your current taxes and save more for retirement with these plans.

  2. jokeabee Says:

    Thanks for this information! Somehow thinking about fees completely escaped my mind. I will have to go back and read some more.

  3. PatientSaver Says:

    I would go with the standard university plan! It's the only one that appears to include "free" contributions by your employer, and you know that Clark Howard would never turn that down!

    Even if you left before you were vested, you would still get all your own contributions. So you have nothing to lose and a chance you'll wind up there after 3 years anyway and then you'll get the bonus money.

    I would never pass on a free 8% on my money.

  4. PatientSaver Says:

    I understand your own money would also not fully vest for the 3 years, but an 8% match would be hard for me to pass up. I guess you have to go with your gut.

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