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dcdave3605 t1_j2dhn0a wrote

The pension plan is like buying membership each year with that 8%. Until you have the minimum years needed, the money is just held in an interest bearing account. If you leave before you meet the minimum years you can request it back. When you reach the minimum or when you max it and retire from the government you will receive a monthly payment based on a calculation. This calculation varies based on your pension plan.

The 401a plan is where the money you must contribute and the money they give you sits and can be invested. If you leave before you reach vesting, the amount your employer has contributed can be reduced and taken back, the amount you pay in will always be yours.

Usually with government jobs you will also be offered a 457b or 401k type plan. If it's a 457b plan, you can contribute up to $22500 each year pre tax(traditional) or post tax (Roth). Ask your HR about this.

Of course you always have access to a Roth IRA up to 6k per year separately of your employer options. You would not be eligible for traditional IRA tax deductions since you are offered an employer plan.

So you could do the minimum of 401a contribution, pension plan, employer contribution, 457b or 401k, and Roth IRA. Whether all or less is what you need in retirement is up to you.

Your plan options should be spelled out in your handbook as far as if you have the 457b and/or 401k option.

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emmyloo22 OP t1_j2eul57 wrote

Thanks! Yes, we have a 457 plan that I could opt into, but I didn’t see the point because.. that money doesn’t grow, does it? Isn’t it almost like having a “savings account” with 0 interest, with taxes to be taken out whenever you withdraw?

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emmyloo22 OP t1_j2eyckp wrote

Okay, I looked at the 457b plan and I told you guys I was dumb lol So, you do invest it.

But you have to pick your own investments and that makes me really nervous. How do I know the percent to contribute to each fund? Or pick which funds to do at all? Ahhh!

Also getting mixed answers when reading about whether to focus on the 457 versus a Roth IRA. I’m thinking the 457 would be more beneficial to me since it doesn’t have withdrawal restrictions starting at age 59.5 like most retirement accounts. Sounds like if/when I separate from my current employer, I could take that money in a lump sum, pay taxes, and decide what to do from there.

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dcdave3605 t1_j2f4x7h wrote

You invest it in what you think will get returns, but based on evidence. Look at the data given to you about your options.

Or look for something called a target date fund and pick that. It will focus investments for you based on your target date for retirement (earlier dates being less risky investments farther away dates being more risky). All investments have risks. The 457b plan is special because it allows you to withdrawal without penalty after you leave employment, rather than after age 59 1/2, like 401ks and other retirement plans. So essentially it could be your early retirement fund.

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