A 457(b) retirement plan is a tax-advantaged retirement savings plan for state and local government employees, as well as some nonprofit workers. Like 401(k) and 403(b) plans, it allows pre-tax contributions with tax-deferred growth until withdrawal, typically after age 59½. A standout feature is its flexibility: withdrawals can be made penalty-free upon leaving employment, regardless of age, unlike other plans with a 10% early withdrawal penalty. Contribution limits match those of 401(k) and 403(b) plans ($23,000 in 2025 for those under 50), with special catch-up provisions for employees nearing retirement. The 457(b) is ideal for public sector workers, offering a secure way to save for retirement. However, investment options may be limited, and employer contributions are uncommon. Coordinating a 457(b) with other retirement accounts can enhance savings, making it a valuable tool for financial planning and retirement security.
- What is a 457(b) retirement plan?
Answer: It is a tax-advantaged retirement plan for state, local government, and some nonprofit employees, offering pre-tax contributions and tax-deferred growth. - Who is eligible for a 457(b) plan?
Answer: State and local government employees, as well as certain nonprofit workers, are eligible to participate. - What makes a 457(b) plan unique?
Answer: It allows penalty-free withdrawals upon leaving employment, regardless of age, unlike 401(k) or 403(b) plans. - What are the contribution limits for a 457(b) in 2025?
Answer: The limit is $23,000 for those under 50, with special catch-up contributions for those nearing retirement. - Can a 457(b) be combined with other retirement plans?
Answer: Yes, employees can contribute to a 457(b) and a 401(k) or 403(b) simultaneously, potentially doubling contribution limits.
