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457 Plan

Employee Contributions:

  • A 457 Plan is a retirement savings plan available to employees of state and local governments and certain non-profit organizations.
  • Participants can contribute a portion of their pre-tax income to the 457 Plan, allowing for tax-deferred growth of retirement savings.

Employer Contributions:

  • Some employers may offer matching contributions to the 457 Plan, providing additional retirement savings benefits for employees.

Tax Advantages:

  • Contributions to a 457 Plan are made on a pre-tax basis, reducing participants' taxable income for the year. This can lead to immediate tax benefits.

Contribution Limits:

  • The IRS sets annual contribution limits for 457 Plans. Participants should be aware of these limits and consider maximizing contributions for optimal retirement savings.

Investment Options:

  • 457 Plans typically offer a range of investment options, including mutual funds and other investment vehicles. Participants can choose investments based on their risk tolerance and retirement goals.

Withdrawal Rules:

  • Withdrawals from a 457 Plan are generally allowed penalty-free after the age of 59½. Early withdrawals may incur penalties, and certain exceptions, such as financial hardship, may apply.

Roth 457 Option:

  • Some 457 Plans offer a Roth option, allowing participants to make after-tax contributions. Withdrawals from Roth accounts in retirement are typically tax-free.

Required Minimum Distributions (RMDs):

  • Participants must start taking required minimum distributions from their 457 Plan accounts after reaching the age of 72, similar to other retirement plans.

Financial Planning Tool:

  • The 457 Plan serves as a valuable financial planning tool, enabling eligible employees to systematically save for retirement.

Educational Resources:

  • Employers offering 457 Plans often provide educational resources and tools to help employees understand the features and benefits of the plan.

Professional Advice:

  • Seeking advice from financial advisors can assist participants in optimizing their 457 Plan contributions, selecting suitable investments, and planning for retirement.


  • Participants who change jobs may have options to roll over their 457 Plan funds into a new employer's retirement plan or an individual retirement account (IRA).

Special Catch-Up Provision:

  • Participants in a 457 Plan may have access to a special catch-up provision allowing them to contribute more than the standard annual limit in the years leading up to retirement.

Understanding the features and benefits of a 457 Plan is crucial for eligible employees in the public and non-profit sectors. It provides a structured avenue for retirement savings with tax advantages, contributing to long-term financial security.