Should I enroll in a 403(b) or a 457 plan?

I'm 27 years old and starting working in the public sector this year. I have student loan debt and earn under $30K a year. I have the option of enrolling into a 403(b) and/or 457 plan at work. I can also enroll in both. Which plan should I go for?

Financial Planning, Pensions
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November 2016

Congratulations on beginning to save for your retirement. Most 27 year olds wait.  Both plans allow you to defer your pay up to the annual limit of $18,000. Check to see if both offer the Roth option. At your age, I recommend you take advantage of a Roth plan.  

The tax withdrawal is different. Under a 403(b) plan, the earliest you can withdraw without an early 10% penalty is age 55. The 457 plan allows the withdrawal without incurring a 10% early withdrawal penalty, whatever your age. With that said, the 403(b) plan generally allows loans and 457 plans do not. So you need to ask yourself if you will be staying in public service your whole career. If you plan on doing something different in the future, then the 457 plan is better. Good luck and invest for growth.

November 2016