457 Plan or Roth IRA

[Angio333]

I work for a large city and have PERS for my retirement. I have also been making small contributions to a 457 Plan (Deferred Comp). The 457 plan is tax deferred. I am a few months away from kicking up the amount I am investing. Which of the following would be a better financial move?

1) Increasing the amount I am contributing to my 457 plan.

2) Keep contributing the same amount of contribution per month in my 457 plan, and start putting the extra in a Roth IRA. This would give me a pre and post tax retirement vehicle.

3) Quit contributimg to the 457 and put it all in a Roth IRA.

4) Quit working and play the lottery full time.

Thanks in advance.

BTW: Number 4 was a joke.

[glock35ipsc]

My wife works for the city and has a 457. I don't remember the % of match, but she contributes up to the match, then contributes to a Roth IRA as well.

If they offer a match, I would at least contribute up to that.

[Angio333]

Unfortunately, we do not get a match.

[glock35ipsc]

Then I would look at the Roth instead of the 457. Chances are that whatever investments the 457 has available will come with a heafty load %. If you open a Roth at a broker (like Scottrade) you can put almost whatever you want into it like individual stocks, bonds, ETF's, index funds, just to name a few.

Or look at Vanguard and their Target Date retirement funds.

[jIM_Ohio]

Question- what is your current income (gross), adjusted gross and taxable income as listed on the 2007 tax return you filed?

If taxable income (married filing jointly) is less than $66100, I would suggest the Roth. If the taxable income is higher than $66101 I would suggest the 457.

I assume we are dealing with the 15% and 25% tax brackets here... if you live in a high tax state, or have a different stated income than 75% of the country, I reserve the right to modify this advice.

[disneysteve]

less than $66100

Jim, is that supposed to say $166,000, not $66,000? I know a MAGI of $166,000 is the cut-off for contributing to a Roth.

[jIM_Ohio]

$66100 is the cap to the 15% tax bracket (married filing jointly). Not a misprint.

IMO a Roth is the best deal if you contribute from the 15% tax bracket.

[disneysteve]

$66100 is the cap to the 15% tax bracket (married filing jointly). Not a misprint.

IMO a Roth is the best deal if you contribute from the 15% tax bracket.

Thanks for clarifying. I didn't know where the number was coming from.

[Angio333]

We do field married/joint. We grossed about $70,000

[jIM_Ohio]

We do field married/joint. We grossed about $70,000

Is taxable income below $65100? If so, I suggest using the Roth.

[Angio333]

I'm comparing funds between my 457 and T. Rowe Price. Can my 457 actually be cheaper, or am I missing something?

For example....

My 457 has a $2 per quarter fee that has been waived since 2006. Not sure about T. Rowe Price.

Right now, my money is in their LifePath 2030 fund.

My 457 has a LifePath 2030 has a 0.40% expense ratio.

T. Rowe Price has a Retirement 2030 Fund that has a 0.73% expense ratio.

[jIM_Ohio]

T Rowe will charge $10 per account (fund) with a balance of less than 5k. This fee is assessed in July and charged to accounts in August. If you wait a month to open the account, you have 11 months to get 5k invested (the yearly Roth max) and avoid the fee.

**if you have more than 20k invested in all T Rowe accounts, the $10 fee is waived**