Saving 15% for retirement

[troyw]

Newbie here...

I've read many recommendations for saving 15% gross for retirement. I have a 457 plan through my employer that requires that I contribute 5% in order to participate. Should I let this 5% count towards my savings rate?

Thanks,


Kristopher

[disneysteve]

Absolutely. If 5% of your money is going into the plan, that is part of the 15% commonly recommended. What does not count toward the 15% is any employer matching funds.

[littleroc02us]

Yes, so you need somewhere else like Roth IRA's to invest the other 10% of your income in. Now this is only if you have no debt and have a 3-6 months of expenses in a bank for an Emergency fund.

[GREENBACK]

Yes, so you need somewhere else like Roth IRA's to invest the other 10% of your income in.

Not neccesarily, as I understand the post. It may be a better deal to put all 15% in the 457. This depends on income and the types of investments available. If the Op is in a low income bracket(probably not) a roth ira may be a good deal but otherwise it might not. I invest in a roth with a small part of my investments as a hedge against tax laws changing in the future. If it weren't for that uncertainty I'd put it all in my 457.

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[troyw]

Not neccesarily, as I understand the post. It may be a better deal to put all 15% in the 457. This depends on income and the types of investments available. If the Op is in a low income bracket(probably not) a roth ira may be a good deal but otherwise it might not. I invest in a roth with a small part of my investments as a hedge against tax laws changing in the future. If it weren't for that uncertainty I'd put it all in my 457.

.

I cannot contribute more than the required 5%. There is an additional option where I can invest my remaining contributions into another 457 plan but I only have two investment options - either an equity index or fixed securities. This plan is run by the same company (actually state retirement system) and there is no cost or fees associated with this plan.

My financial planner wants me maxing Roth first, which I am doing, and any additional funds will go to a brokerage account. He doesn't like the 457 option above my requires 5%.

[GREENBACK]

I cannot contribute more than the required 5%. There is an additional option where I can invest my remaining contributions into another 457 plan but I only have two investment options - either an equity index or fixed securities. This plan is run by the same company (actually state retirement system) and there is no cost or fees associated with this plan.

My financial planner wants me maxing Roth first, which I am doing, and any additional funds will go to a brokerage account. He doesn't like the 457 option above my requires 5%.

I see. I misunderstood a bit. Sounds like a roth is the best option then.

[troyw]

I see. I misunderstood a bit. Sounds like a roth is the best option then.

Nah, I failed to give you all the information...sorry about that!

Thanks to all for the advice.

[littleroc02us]

Not neccesarily, as I understand the post. It may be a better deal to put all 15% in the 457. This depends on income and the types of investments available. If the Op is in a low income bracket(probably not) a roth ira may be a good deal but otherwise it might not. I invest in a roth with a small part of my investments as a hedge against tax laws changing in the future. If it weren't for that uncertainty I'd put it all in my 457.

.

Tax laws changing on what. Roth IRA's are tax free upon withdrawl after age 59 1/2. They have already taxed the money at the time you recieved it. I max mine out every year. They can't do that. O.k. they are the gov't and are capable of criminal acts all the time.

[GREENBACK]

they are the gov't and are capable of criminal acts all the time.

Currently the law says that you get tax free withdrawls at 59 1/2. Have you looked at our deficit or the state of social security or the new health plan or a bunch of other unpaid for gov't programs. I don't trust that they won't creatively find a way to tap into all that missed roth revenue when taxes are a lot higher than they are now. They switch they're coats all the time. Believe me, I work for them.

[Stuartthomas]

of course saving for your future is a must ..i have a 401k plan ..

[dczech09]

Hey if I understand correctly, that 5% contribution to your 457 is the required amount and maximum you can contribute? The only reason I ask is because 457 should be your LAST resort after maxing your Roth IRA. Roth, 401k, 403b, SEP, Simple, or any other tax sheltered annuity takes priority. 457 plans are simply deferred compensation; some people do not understand this.

[littleroc02us]

Currently the law says that you get tax free withdrawls at 59 1/2. Have you looked at our deficit or the state of social security or the new health plan or a bunch of other unpaid for gov't programs. I don't trust that they won't creatively find a way to tap into all that missed roth revenue when taxes are a lot higher than they are now. They switch they're coats all the time. Believe me, I work for them.

The money has already been taxed.

[tripods68]

Hey if I understand correctly, that 5% contribution to your 457 is the required amount and maximum you can contribute? The only reason I ask is because 457 should be your LAST resort after maxing your Roth IRA. Roth, 401k, 403b, SEP, Simple, or any other tax sheltered annuity takes priority. 457 plans are simply deferred compensation; some people do not understand this.

Deferred compensation like 457, 401k, 403(b) benefit almost everyone because of the pre-tax option, even better if Employer match it. It avoids you from paying too much taxes at the end of the year. Both wife and I contributes to deferred comps and has proven to be most tax effective outside our retirement accounts (i.e., Pensions and Roths).

[GREENBACK]

The money has already been taxed.

True. That's why I stated that they can get creative. You might not get specifically taxed on that money again but who knows what may happen when you go to spend it.

[littleroc02us]

True. That's why I stated that they can get creative. You might not get specifically taxed on that money again but who knows what may happen when you go to spend it.

So, if that is your theory I probably shouldn't buy a house because someday the gov't will come and seize it. As long as I can put money into Roth IRA's and they state that you will have a tax free withdrawl I will continue to take advantage. You may be right though, all these bozos we keep putting in office will probably find someway to get their hands on money, because all they want to do is spend more of it.