If you are a Minnesota public employee approaching retirement, your pension probably gets most of the attention.
That makes sense.
For many government employees, first responders, educators, and other public servants, PERA, TRA, or MSRS may provide an important foundation for retirement income.
But your Minnesota Deferred Compensation Plan (MNDCP) 457(b) can play a very different role.
It can provide flexibility.
It may help bridge the years before Social Security or Medicare, provide money for larger expenses, supplement your pension, and give you more choices when deciding where retirement income should come from.
So instead of asking only:
“How much do I have in my 457(b)?”
I think there are five better questions to review as retirement gets closer.
1. Am I Saving the Right Amount During My Final Working Years?
The last several years before retirement can be an important savings opportunity.
For some public employees, income is higher than it was earlier in their career. Children may be grown. A mortgage may be smaller. Other expenses may have decreased.
At the same time, MNDCP offers catch-up provisions that can potentially allow eligible participants to contribute more than the normal annual limit.
That makes this a good time to ask:
- Am I taking advantage of the contribution options available to me?
- Could increasing my contribution meaningfully improve my retirement plan?
- Do I qualify for an age-based catch-up?
- Could the special three-year 457(b) catch-up apply to me?
- How would a larger contribution affect my current cash flow and taxes?
The goal is not automatically to contribute the maximum.
The goal is to understand whether your final working years present an opportunity you do not want to miss.
Related resource: Minnesota Deferred Compensation Plan (MNDCP): A 457(b) Retirement Guide for Public Employees
2. Should My Contributions Be Pre-Tax, Roth, or Both?
This is one of the questions I think deserves more attention.
A pre-tax MNDCP contribution may reduce taxable income today.
A Roth contribution does not provide that same current tax reduction, but qualified Roth withdrawals may eventually be tax-free.
Neither option is automatically better.
For someone approaching retirement, I would want to understand:
- What tax bracket are you in today?
- How much taxable pension income will you have after retirement?
- Will you receive Social Security, and if so, what is the estimated amount?
- How much traditional IRA or other pre-tax money do you already have?
- Would additional Roth savings give you more flexibility later?
For some people, having both pre-tax and Roth retirement savings creates more options when deciding where income should come from each year.
3. Does My Investment Strategy Still Match My Retirement Timeline?
An investment strategy that made sense when retirement was 20 years away may need another look when retirement is two or three years away.
That does not necessarily mean becoming extremely conservative.
It means deciding what job the money will have.
For example, money you expect to use during the first few years of retirement may deserve different consideration than money you expect to leave invested for another 15 or 20 years.
As retirement approaches, consider reviewing:
- Your current investment allocation
- How much investment risk you are taking
- Plan fees and expenses
- Other retirement and investment accounts
- Your expected pension income
- When you expect to begin using your MNDCP
If you want additional investment choices beyond MNDCP's core investment lineup, you may also want to understand how the MNDCP Self-Directed Brokerage Account works.
4. What Job Will My MNDCP Have After I Retire?
This may be the most important question.
Your pension and MNDCP do not need to accomplish the same thing.
Your pension may provide predictable monthly income.
Your 457(b) can provide flexibility.
For example, MNDCP could potentially help provide:
- Income before Social Security begins
- Money for healthcare before Medicare
- Funds for travel or home projects
- A reserve for unexpected expenses
- Additional income beyond the pension
- Flexibility around taxes and retirement-account withdrawals
For someone retiring from public service in their 50s, the governmental 457(b) can be particularly useful.
After separation from service, governmental 457(b) distributions generally are not subject to the usual federal 10% additional tax that commonly applies to early distributions from certain other retirement accounts.
That can make the 457(b) an important tool for someone retiring before age 59½.
The question is not simply:
“When am I allowed to take money out?”
A better question is:
“When should I take money out, and what do I want this account to accomplish?”
5. Should I Roll My MNDCP Into an IRA When I Retire?
Retirement often creates a desire to simplify.
You may have several accounts from different stages of your career, and combining everything into one IRA can sound appealing.
Sometimes that may make sense.
But I would not assume a rollover is automatically the right decision.
Before moving MNDCP, compare things such as:
- Investment options
- Plan and investment costs
- Account services
- Withdrawal flexibility
- Early-access rules
- Your age at retirement
- Beneficiary options
- How the account fits with the rest of your retirement assets
This can be especially important if you retire before age 59½.
Moving money from a governmental 457(b) into an IRA may change the withdrawal rules that apply to those dollars.
Sometimes consolidation is helpful.
Sometimes preserving flexibility is more valuable.
The Planning Takeaway
Your MNDCP is not just an account balance.
It can be one of the tools that helps connect the different stages of retirement.
Your pension may provide foundational income.
Social Security may provide another source of lifetime income.
MNDCP can provide flexibility.
IRAs, Roth accounts, and other investments can fill additional roles.
The goal is to decide what job each source of money should have before retirement begins.
That is very different from simply asking which account should produce the highest return.
A Checklist Can Help - Check This Guide On Issues to Consider With My Employer Provider Benefits
There are also more employer-benefit decisions to consider than just the 457(b).
Medical insurance, HSAs, life insurance, disability coverage, retirement-plan contributions, investment choices, employer matches, and rollover decisions can all become important as retirement gets closer.
As you work through it, pay attention to the questions where your answer is:
“I'm not sure.”
Those are often the areas worth reviewing before retirement.
How Mullins Financial Helps
At Mullins Financial, we help Minnesota public service professionals coordinate their pension, MNDCP 457(b), 403(b), Social Security, taxes, investments, healthcare, and retirement income through the CLARITY Retirement Method™.
The goal is not to look at each account separately.
It is to understand how the pieces work together so you can make retirement decisions with more clarity and confidence.
If you are within the next several years of retirement and want to better understand what role your 457(b) should play, we can help you bring the pieces together.