457 Plan

  

A 457 Plan (again with the great naming) is basically a 401k or 403b that is targeted to U.S. Government workers and a few flavors of independent contractors, such that they can defer taxable earnings. The same withdrawal timing applies with one key diff in the 457, which is that there is no 10-percent penalty for early withdrawal the way there is with the other plans. So... have that mid-life crisis at 43 and just must have that CV red Porsche? Well, have at it. No early withdrawal penalty. And get the big one... you may have to live in it in your retirement years.

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Finance: What is a Pension?31 Views

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finance a la shmoop. what is a pension? well it rhymes with tension, and likely

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for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]

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another state employees pension that's backed up by a state that's going

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bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people

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well a pension is another term for a retirement fund. but what's special about

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a pension is that the employer essentially forces you to put away money

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for your retirement and then they invested for you.

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how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]

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employed ditch-digger might get a contribution of say 10 grand a year into

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her pension, and that's each year 10 grand of forced savings for as long as

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she you know digs ditches for the state. and in some states where the unions are

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strong in the governing financial knowledge is weak the government

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guarantees a minimum financial return on the pension investment made on behalf of

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the employees. that is in California for example the state guarantees a 10% per

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year return on their invested pension savings. if the invested return like [equation]

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investing it in Wall Street and stocks and bonds and private equity funds and

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all that stuff well if that invested return is less than that number less

01:19

than that 10%, then the state rights to the pinch and a check to cover the

01:23

incremental difference. yeah it's a huge Delta and it's well pretty much why you

01:28

a Californian Illinois you're going bankrupt remember. Jesus Saves

01:31

but Moses invests. [ Moses, holding stone tablets glares and demands interest]

01:35

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