When I graduated from Berkeley, I got lazy and forgot that I even had a 457(b). To be quite honest with you, I never checked how much money was put into that account. All I knew was it was there and that someone was managing it. But the problem was, it was under $2,000. In order for The Regents of California Berkeley to continue managing my money in their retirement plan, I needed to reach a certain minimum amount. 

I wasn’t well versed in 457(b)’s and was suffering from analysis paralysis when picking a brokerage (in hindsight, I should’ve just called fidelity and had it rolled over), but I was jet lagged after coming back from my Paris Internship. Eventually it slipped my mind, until sometime in October, I got a letter saying “due to insufficient funds, we’ve closed your 457(b) and are refunding this money to you.” 

In the moment, I was broke, moved back home with my parents, and making barely any money at all. I was banking on getting a work visa to go back to Paris to finish my research on Gastric Bypass Surgery (which we recently published in April 2020), but those plans had fallen through. I was depressed, unemployed, and desperate for money. So when I got that refund check for $384, I mobile deposited that thing within 5 minutes. 

Now normally, if you have a “qualified” retirement account, meaning that there are age restrictions for your withdrawal, then you’d get slapped with a 10% early withdrawal penalty fee. But my 457(b) was a “non-qualified” account, meaning that I could take the money out at any age without any penalty fees. All I’d have to do was pay income taxes on it. 

Remember, I was broke that year, didn’t make over $10,000, so my tax bracket was as low as it could be. After the standardized deduction, I ended up getting a pretty hefty tax return. But, I do regret not being able to keep my 457(b). It’s honestly a great tax shielding vehicle with very little cons if your income stays under that 20% tax bracket! I could withdraw my money at any time and just pay the income taxes due for that fiscal year or just leave it in there to grow tax free! 

We’ll talk about the pros and cons between a 457(b) and a 401(k) in a later post. But for now, just know that if your employer offers a 457(b), and you’re still many years away from the age of 72, consider capitalizing on that before going the traditional route with a 401(k)! And if you’re still not sure, consider reaching out to a financial advisor!