Ask Dave Ramsey Healthy Finance

Dave Says

Written by Healthy Living

Investigate your options

Dear Dave,

I’m single and a firefighter, and we have a pension plus a 457(b) retirement plan. I’m not contributing to the 457(b) right now because I’m following your plan and in Baby Step 2, which is paying off debt. Our retirement plan is managed by a big life insurance company, but I know you don’t like the idea of using insurance companies when it comes to investing. Can you give me a little guidance?


Dear Dustin,

I’d max out a Roth IRA, which would be $6,000 a year in your case, before I did anything with the 457(b). That may not take you to the level I recommend—which is putting 15 percent of your income toward retirement—so then I’d investigate the options offered by the insurance company that’s managing your 457(b).

When you have a look at the options available to you within 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.

Still, warning sirens in my head go off when I hear that a life insurance company is running a 457(b). Investing through a life insurance company is a bad idea 100 percent of the time. Now, is it a bad enough idea in this case to avoid it altogether? It may be an OK idea in this specific instance, but chances are it won’t be anything you’ll look at later and be blown away by great results.

That kind of thing just isn’t going to happen when you wrap an insurance company, or life insurance, around investing. I mean, you don’t go to a transmission shop to get your muffler fixed. It’s just not what they do!


About the author

Healthy Living

Healthy Living is unique in a sea of health magazines that only present information on nutrition and exercise. Published by Akers Media Group, Healthy Living goes much farther by focusing on the four pillars of a true wellness — physical, mental, spiritual and financial health.

Healthy Living promotes a healthy, well-balanced lifestyle with easy-to-read features, try-it-at-home exercise programs, and expert advice from financial planners, mental health professionals, and a variety of other leaders in their respective fields.

Leave a Comment