Should I invest in my company's deferred comp or no?
What's the point in investing in my company's deferred compensation plan (457b) if I already do my own investing with my money? Is there any benefit at all (outside of pretax dollars going into the 457b plan)?
I feel like I shouldn't do it if I already have my own investing plans....
Is there something I'm missing? Why do people who are doing FIRE do this plan if all they have to do is put aside 'X' amount of dollars into an index fund for 25 years and call it a day?
- kswck2Lv 72 months ago
Any retirement account is worth investing in, even multiple ones. I had a 401k and a Roth IRA for years.
- ?Lv 72 months ago
In the regular account, you pay tax every year on your investment gains. In a retirement account, there is no annual tax.
The deferral of tax could also be advantageous if you're in a higher tax bracket now than you will be during retirement.
On the down side, there are few choices for index funds within a 457(b) plan. You may well be able to get a higher return by investing on your own and paying tax.
- StephenWeinsteinLv 72 months ago
The benefit is mainly to avoid taxes. With an index fund, outside of 401k, 403b, IRA, etc., plans, you have to pay tax on the dividends every year. With a deferred comp plan, you don't pay tax until money is distributed (comes out of the plan). That's in addition to getting to defer taxes on your wage or salary.
- A HunchLv 72 months ago
If the company offers a match, that increases your income.
The other benefit is it defers taxes
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- AnonymousLv 72 months ago
It really depends on the details. It may be worth your while if the employer matches your contributions or we're talking about stock options.