I'd like to give some info on my current financial situation.

I am 24 years old, been working full time since I was 18. At age 22, I got a job at the University that I attended that offers a mandatory pension plan. 6% of my salary gets taken out each pay check, but if I stay with a state university for 30 years (I will be 52 at that point), they will pay me 80% of my highest salary for the rest of my life when I retire. If I decide to wait until I am 62, they will pay me 100% of my highest salary.

I'm already on my 3rd state university and have found my final career choice. I anticipate staying with this department until I retire. Everyone else here are over 40 and most have been here for over 20 years. At the rate that I have been getting promotions, I'll be making well over 6 figures when I retire at 52.

I also own my own home that is worth over $200k. I have 2 cars, both worth about $60k combined. Only loan I have is my mortgage, all student and car loans are paid off.

I have on average $10k in an emergency fund. I like to buy some nicer things in life every now and then .

I am unmarried, but will be later this year.

I need some help in deciding investment options. The state universities do not match on 401k, 457, or 403b. They only care about your pension plan. Is it wise to put money in unmatched 401ks, or should I invest elsewhere? Currently, my dad has suggested that I put $500 each in 401k, 457, and 403b per pay check and have been doing so since February. I also put in $5000 per year into a Roth IRA since I was 18.

Should I divert the unmatched optional investments else-where? Do you think my pension plan should cover my retirement expenses? When I retire, I plan on moving back to China where the food is delicious and the cost of living is low!

The food may still be delicious in China when you retire, but the cost of living may not be that low.

401ks are really great for their matching and automatic investment features, but not always so great when it comes to fees. Since you aren't getting any match I'd max out a ROTH first (if you can contribute) then fund your 401k (403b, etc) assuming you have a good grasp of any hidden management fees.

Even so, tax-deferred retirement growth in the 401k may be worth the fees.

The cost of pensions such as yours are largely considered unsustainable. What makes you think they'll still be there in their present form by the time you retire?

Largely considered unsustainable, yes, but I don't think this one will go away anytime soon. This is the state funded pension plan for all state employees. It is funded by taxes, student tuition in public universities, and by every state employee (6% of every pay check).

http://www.nctreasurer.com/DSTHome/Reti ... +TSERS.htm

However, it could still happen. With this information, I would probably just leave this job for one that pays a lot more with higher risk in order to make more money. However, everyone I work with is only really staying with the State at a lower pay because they are trying to reap the benefits of the pension plan.

If so, that means that my dad is wrong about this and I should have just started at a private company to begin with, with a higher salary.

And everybody wonders why education costs so much in the US! Incredible!

Hmm, a few things here:

First off, a 401(k) is a profit-sharing plan that for-profit corporations can fund from profits. A 403(b) is a similar type of arrangement for non-profit institutions. It seems very odd that you would be able to participate in both. After looking at the NC treasurer website it appears to me that the state does offer both, but not to the same people.

Your pension is probably a 401(a) plan. There does seem to be an employer match. It has been accelerated aggressively recently to strengthen the funding of the future obligations. It was 3.57% a couple of years ago and will be 12% by 2015. This is in addition to your contribution. Without looking into the finances far more thoroughly it is impossible to say whether it will be there for you. But there is a "Future of Retirement" report available on the website that you should read.

Now, it is hard to find information on fees for the optional retirement plans (403b, 401k, 457) but they seem to be through Prudential Securities. Prudential is, in my opinion, very high fee-poor performance. So it might not be a great place to put extra money even after considering the tax savings. But that is something you should evaluate on your own. The problem is that sometimes big plans like a state system can negotiate great rates that make these normally expensive firms have very low fees. My optional retirement plan money is in index funds from a company that is normally expensive but the fees I pay are less than what Vanguard charges because I am also in a state plan that negotiates rates.

Get information on the system from the plan. They should be able to give you information about the investment options and the various fees charged. Compare the fees to what would be charged for alternatives you do on your own (Roth IRA, IRA).

Also consider what might happen later in life. The fact that you plan to return to China could be important here. If tax law changes and the US taxes your money at maximum rates because you are an ex-pat, any benefit of the tax deferral could be lost. That is obviously entirely speculative but it is something that you should factor into your decision.

Good luck!

Maybe.

There isn't any reason to contribute to both a 401(k) and 403(b). As Homework said, it's surprising you have access to both. Pick whichever has the lower fees. What are the fees anyways? It used to be hard to tell, but it is getting better due to recent legislation.

I have invested in matchless, high-ish fee 401(k)'s before but only because I did not intend to work at that employer the rest of my life. If you do work there the rest of your life, then the account will be active the rest of your life, eating you alive with high fees if they're high.

A 457 is a bit different because you can use it for early retirement. Do you plan on that?

I wouldn't put all my eggs in a pension plan. Too many pension plans have gotten into trouble. Not that the stock market is any better.

Stannius is correct. A 457 is a different animal and yours might e a great deal for you.

In my case I have a great pension plan. The fees are dirt cheap. But the 457 plan through the same company is abusively high fee. They would charge me around 9% to play. But of course it is difficult to actually find out that information.

Yoshi, if you consider investing in your 457 plan, it might be a great deal. But I strongly urge you to get 2-3 finance professors in your university to verify that beform giving the company a dime.

DoingHomework: Thanks for the very informative post. I will go out and do some more research on various aspects of the offered retirement plans.

Thanks to everyone else for their contribution as well!

My wife has the opposite. Her DCP plan is dirt cheap; last I checked it had a 0.15% expense ratio (this was a few years ago when major index funds had fees about twice that). For her 403(b) she can choose amongst providers from good to poor.

So the point is, you really have to find out the fees in order to intelligently compare the alternatives.