Millionaire Educator Shares the Secrets of the 457b
- Our guest: Millionaire Educator shows us how to invest your money. He shows how teachers, firefighters, police officers and public employees can leverage the power of pretax savings to supercharge their retirement , and become millionaires. Take this information to learn how to invest your money and retires decades before your peers
- Ed’s journey from a college basketball player to a Spanish teacher
- Graduate school led to $45,000 total debt at age 33
- Taught ESL in Saudia Arabia and paid off debt
- Returned to the US from Saudia Arabia with a $110,000 net worth
- Had to figure out the concept of FIRE before it even existed
- Taught in public school in Georgia for the next 7 years
- The two retirement plans available to public sector employees: 403(b) and 457
- Teachers can fully fund both of these accounts ($18,000 to each in current year)
- Putting away this money helps dramatically decrease your taxes
- In 2007 his net worth was $400,000
- 2009: Next phase of their retirement journey
- 403(b) fees are significant, so it was to their benefit to move jobs to roll their 403(b) accounts to a lower fee (‘separation of service’ clause)
- 457b is a special account as it doesn’t have the 10% penalty for pre-59.5 age withdrawals
- Phase 3 of retirement plan: Starting in 2014 they worked for 2 years and saved $238,000
- What they are living on: a) $90,000 from 457s b) 72-T withdrawals from IRAs
- How to control your tax bracket for big savings (potentially down to $0)
- Debt avoidance: debt is paid with after-tax dollars
- Geo-arbitrage and living abroad or even just a lower cost state
- 457b account is an emergency fund that is pre-tax dollars
- How Brad and Ed are not “perfect” with their investing
- Pay increases for teachers when attaining new degrees. Raises that last a lifetime
- Earning extra money for coaching and extended day teaching to max out retirement accounts
- How they saved over $100,000 in a year towards retirement accounts
- Hot Seat Questions
Listen to Brad and Jonathan’s thoughts about this episode on the Roundup Episode 13R.
Links from the show:
- Millionaire Educator
- 403(b) Wise
- Vanguard
- IRS info on 72-T
- Mad Fientist article on Front Loading
- Roth IRA Ladder on JL Collins
- My Trillionaire Plan post on Millionaire Educator
- Root of Good
- Go Curry Cracker
- $150,000 income, $150 income tax by Root of Good
- Millionaire Educator on Twitter
Books Mentioned in the Show:
Resources:
The Golden Albatross
If your job offers a pension, then this book is a must-read. Easily learn how to calculate your pension’s objective value and weigh it against the subjective benefits of leaving for more fulfilling work.
