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457b Retirement Plans | Are You Eligible? Why You Should Find Out! - YouTube
Channel: Brad Finn
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If you are or know a police officer
firemen teacher municipal worker any of
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those professions then you really need
to listen to this I might blow your mind
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today I'm gonna tell you about something
that's been called like the unfair
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advantage by choose Fi or the hidden gem
of retirement plans and that's the 457 B
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plan this is a retirement plan that's
been available to me for 15 years and I
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never even knew about it so I've been
doing a ton of research on it I want to
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fill you in and maybe change the course
of your retirement future today if
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you're new here my name is Brad I make
videos with tips and motivation on how
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to get out of debt how to save money and
achieve financial independence the first
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question I ask myself is why did I not
know about this 457 B plan and the fact
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of the matter is it's really because
it's a rare retirement plan in this
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video I'm gonna tell you exactly what it
is who its eligible for the similarities
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to the 403 B and the 401 K that were
used to but more importantly the amazing
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differences that made me contribute to
my 457 before even thinking about my 403
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B as always guys before you make any
changes always do your own research
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there are gonna be some cons that I'm
gonna tell you about in this video
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my purpose right now is just open your
eyes and maybe have you look a little
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bit deeper because that's what I did
after listening and learning about this
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457 bit first and foremost what is a 457
B it is a non-qualified tax-advantaged
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retirement account is extremely
extremely similar to the 401 K that you
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might be used to or the 403 B it is
primarily given to those employees of
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local governments like I said police
officers firemen schoolteachers
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sanitation workers civil servants all
these municipal people as well as other
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nonprofit organizations like hospitals
and charities there's a pretty good
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chance if you're offered a 403 B at your
job you might have the availability of a
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457 the similarities are this the money
goes
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in pre-tax so it lowers your tax burning
just like a 401k or 403b all of the
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growth is tax deferred meaning that
later in life when you pull it out
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that's when you are going to pay taxes
on the contribution limits are exactly
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the same they are at $19,000 each if you
are 50 and over you get that $6,000
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catch-up bonus and in some rare cases
with the 457 you get a catch-up bonus
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that is doubled and that is if you are
in the last three years of your plans
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contract that's what you really need to
look into and those are minor details if
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you're really close to retirement age
another similarity is that what
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separation of service meaning that you
leave your job you are going to be able
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to roll over your 457 into other
accounts like a traditional IRA or a
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Roth IRA or even another company
sponsored 457 plan now if you're one of
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those employees or local government
employees you have to look at one thing
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you have to see if you have a 457 B that
is governmental or non-governmental
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those non-governmental ones are gonna be
the ones with charities and a lot of
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hospitals and things like that and
they're gonna come with a little bit of
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danger so you have to do your research
I'm gonna give you some of the cons of
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those but I don't know all of them
because I've really only done the
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research on the 457 B which is the one
that I am eligible for so the
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similarities of the 401k and the 403 B
of being able to contribute tax-free to
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be able to roll things to have a really
high contribution limit let's look at
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the things that make the 457 something
that in my opinion you cannot pass up
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first the 457 is not supplemental of the
401 K or the 403 B meaning this if you
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have the opportunity to have a 457 plan
that means that you can essentially max
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out to retirement plans that's right you
can contribute $19,000 to your 403 B or
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401 K and now add an additional $19,000
his 457 which can lower your tax burden
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by $38,000 you could do some simple math
but if you're in like the
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twenty-five percent tax bracket if you
take 25 percent of $38,000 put that
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money in your pocket or be able to
reinvest it and not give it to the
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federal government that alone right
there makes the 457 an excellent
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opportunity before the second most
amazing thing as well
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unlike the 401k and the 403 B you can
withdraw your money from a 457 at any
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time after separation of service anytime
you want with no 10% penalty for being
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under fifty nine and a half for those of
you that have a 401 K and a 403 B and
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aren't too sure you have to wait to your
59 and a half or do things like Roth
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conversion ladders and backdoor Ross to
get your money out before fifty nine and
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a half with the 457 you could take your
money at any time without paying a
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penalty now this is huge in the fire
community and those that are looking to
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retire from their w2 jobs and work on
things like side hustles and building
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your own business if you're going to be
leaving your main job and retiring early
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before 59 and a half you can build this
account while you're still working and
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then pull from it whenever you want
before 59 and a half now remember when
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you take this money out that is a
taxable event and you will pay taxes on
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it but now you have the opportunity to
take the money out only what you need
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which once again is gonna lower your tax
bracket when I heard this I just
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couldn't believe it that meant that I
could max this out for the next three to
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five years then when I leave my job
teaching and I work on other things I
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can use this as a source of income as an
emergency fund as anything I want I
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could take money from it as I need and
during that time it is gonna grow
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tax-deferred this alone in my opinion
sets it far above the 401 K and the 403
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B but there are some cons and I just
want to address them really quickly
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number one they are really really rare I
mean in my school I was told that my
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district didn't even
no they really existed and that my Union
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fought to get it in place for us so if
you are a 403b employee and don't have a
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457 plan ask Human Resources to look
into it I'm a teacher I have one my wife
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who teaches one district over her
district is not all for the 457 plan and
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now we are gonna start working towards
trying to get that for her and her other
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peers at that School District so if you
don't have one look into how you can
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possibly get one another con about the
457 plan is that employee matches are
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extremely rare unlike the 401 K where
they are very likely and with a 457 if
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you do get an employee match that counts
toward your contribution for example in
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a 401 K if the maximum contribution is
$19,000 you as the employee can put that
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in and the match goes above and beyond
that but in a 457 plan whatever the
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employee throws in that counts towards
the 19,000 another con with this just
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like any retirement plan is that the
fees can be really really high so avoid
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things like annuities guys and do your
research look for the low-cost options
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mine with the New York State deferred
compensation plan I'm paying expense
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ratio of 0.001 percent and they have a
fixed yearly fee so I did really really
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good so look at your options just like
you would with a 403 B and a 401 K but
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watch out because the fees just like
anything they can tend to be high and
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the last con that I want to talk about
is if you are a non-governmental 457
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employee meaning that you work for one
of these charities or you work for a
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hospital or some of these union
employees you have to be careful they'll
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have the designation of a non-government
457 plan and like I said before I don't
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know too much about them but from
reading and doing my research some of
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the cons that came up with these
non-governmental plans are they are not
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sheltered from creditors so if you work
for a company that is non-governmental
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and you fear them going bankrupt the 457
is not going to be a good plan for you
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because if they do creditors will be
to come after that unlike the
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governmental plan that I've been talking
about and the last con to this
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non-governmental plan is that you cannot
roll it over you can only roll over
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governmental plans so if you're one of
the employees that I've been talking
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about though firemen police officers
teachers municipal workers there's a
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very high likelihood yours is
governmental it's a really easy check
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but I can assure you that if you're one
of those employees you should be good to
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go the people that really need to look
into it is if you work for a
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non-governmental agency like I just
talked about a charity a hospital or you
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get yours to a particular union just
make sure that it's a governmental plan
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and if it's non-governmental make sure
you really dot your i's and cross your
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T's I got to give a shout out to the
millionaire educator he was on a podcast
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called choose Fi and this is where I got
all of my knowledge to really make me do
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the research I'm gonna link that video
right here above for other investment
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videos check this one out and if you're
new here consider subscribing until I
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see you on the next one stay positive
work really really hard and always be
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kind to others I hope you have yourself
an amazing day and a better tomorrow
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