Tag Archive for: retirement

Why Your 457 Plan Might Be a Contingent Asset in a Florida Divorce, and What that Means for You

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For physicians, executives, and professionals working in government or the non-profit sector, a 457 deferred compensation plan often plays a key role in long-term financial security. These plans carry unique protections—and can contain unique risks—that require special attention during divorce.

In Florida, a 457 plan is considered a marital asset to the extent contributions occurred during the marriage, plus or minus passive gains or losses. But not all 457 plans are created equal. Whether your plan is governmental or non-governmental, 457(b) or 457(f), affects how it’s classified for division and what options are available to you.

Doctors and Non-Profit Executives Should Known: What Makes a 457 Plan Different?

A 457 plan is a type of deferred compensation plan that allows you to save for retirement. Unlike a 401(k) or IRA, ownership of the funds works differently depending on the type of employer and plan:

  • Governmental 457(b) Plans: Offered by state and local governments, these plans are held in trust or custodial accounts for the exclusive benefit of employees. This means they are protected from the employer’s creditors and are generally considered vested assets for purposes of divorce.
  • Non-Governmental 457(b) Plans: Offered by large non-profits—such as hospital systems or private universities—these plans are not held in trust. Instead, the assets remain part of the employer’s general funds until distribution, making them vulnerable to the employer’s creditors. These are considered contingent assets because your right to receive the funds depends on the employer’s financial health.
  • 457(f) Plans: These are often offered to highly compensated executives as “top-hat” plans. Unlike 457(b) plans, employees must meet specific conditions (like staying with the employer for a certain period) for the money to vest and for the employee to become eligible to receive the funds. If you don’t satisfy those conditions, you forfeit the balance. This makes 457(f) plans even more contingent and subject to greater discounts in divorce valuation.

To understand the key differences between these plans outside of the divorce context, learn more about 457 plans from Dr. Jim Dahle at the White Coat Investor here.

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Financial Education Books For Spouses Going Through Divorce

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It is common when going through divorce in Florida or elsewhere for one or both spouses to be lost when it comes to finances and retirement planning.  One of the best things that you can do to make divorce less traumatic and to help ensure that you and your spouse’s interests are being met is to involve a Neutral Financial Professional within a Collaborative Divorce process.

It is also important to educate yourself when it comes to finances.  Below are a list of books that I have personally found helpful to educate myself.  Even if you are not going through divorce, you may get something from these resources.

The Total Money Makeover by Dave Ramsey

If you have medical school student loans, a high interest mortgage or home equity lines of credit, or other forms of large debt, and you just don’t know how you could possibly pay it off in any reasonable amount of time, Dave Ramsey’s The Total Money Makeover is for you.  As someone who went to a very expensive law school and incurred six figures in educational debt, I found this book immensely helpful.  I am a big believer in the Financial Independence (sometimes also called Financial Independence Retire Early, or “FIRE”) movement; so many influencers who have put themselves on the path to FIRE have mentioned that they started off by getting out of debt after reading this book.

The Simple Path to Wealth by J.L. Collins

J.L. Collins’ The Simple Path to Wealth is the book I wish I read when I was just starting my career.  His main message is that investing does not need to be complex, the stock market will crash but it will also rebound and grow, and that you can build significant wealth over time by simply investing in a total U.S. stock market index fund and maybe also a total U.S. bond index fund (depending on your age and risk tolerance).  J.L. Collins is known as the Godfather of FIRE, and he tells audiences that you can actually find most of the ideas in the book for free in their raw form in his blog’s Stock Series.  I have found both the book and Stock Series helpful to explain the markets and prevent me from selling my portfolio when the market has crashed.  Further, the Stock Series, which Collins updates regularly, does a good job at explaining many of the types of investment vehicles that get addressed in divorce, such as brokerage accounts, traditional and Roth 401(k)s, traditional and Roth IRAs, 403(b)s, and TSPs.  Beyond educating yourself, The Simple Path to Wealth may be a great book to provide as a gift to your young adult children as the content started as a letter to J.L. Collins’ daughter, explaining to someone who didn’t want to think about investing how they could build wealth without giving it much thought.

I Will Teach You to Be Rich by Ramit Sethi

Admittedly, the title is kind of cringeworthy, but I found the content in Ramit Sethi’s I Will Teach You to Be Rich to be helpful nonetheless.  He provides very practical advice on everything from lowering interest rates you pay on credit cards, to opening high yield savings accounts, to automating saving and investing.  He also believes strongly that you don’t need to live like a hermit to build wealth, and that it is important to mindfully spend money on those things that bring you happiness.

Atomic Habits by James Clear

James Clear’s Atomic Habits explores the science of habit formation and how small, incremental changes can lead you to significant improvements over time.  Clear stresses that consistent, tiny improvements—what he calls “atomic habits”—can compound over time, leading to profound personal and professional transformations.  His concepts mesh pretty well with the books discussed above, especially when he addresses the power of compound interest to transform small, consistent investments over a long period of time to vast amounts of wealth.  Besides becoming financially healthier, this book helped me become physically healthier, as well, by influencing me to make small, consistent changes in my diet and exercise, leading to the shedding of 30+ pounds over the course of eighteen months.

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