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Ask Dave

Investigate your options

Dustin asks for guidance when it comes to his investing situation. Dave is happy to help.

QUESTION: Dustin’s employer offers a 457(b) retirement plan that is managed by a large life insurance company. He asks Dave for guidance when it comes to investing.

ANSWER: I’d max out a Roth IRA before I did anything with a 457(b). That may not take you to the level I recommend, putting 15 percent of your income toward retirement, so then I’d ask a lot of questions about the options offered by the insurance company that’s managing the 457(b).

When you have a look at the 457(b), you’ll need to pay special attention to two things—the fees, this is where they’ll kill you, and the rates of return. If they are somehow accessing mutual funds, and you can get stock market-like rates of return—I’m talking about a 10 to 12 percent average over many years—then I’d put some in there.

Warning sirens go off in my head when I hear a life insurance company is running a 457(b). Investing through a life insurance company is a bad idea 100 percent of the time. Is it a bad enough idea in this case to avoid it altogether? It may be an okay idea in this specific instance, but chances are it won’t be anything with results that will blow you away. That kind of thing just isn’t going to happen when you wrap an insurance company, or life insurance, around investing.