457(b) Plan: Retirement Savings for Public & Non-Profit Employees
A 457(b) plan is a retirement savings option for state/local government employees and certain nonprofit workers. You can contribute either pre-tax or Roth dollars and your money grows tax-deferred-or tax-free with qualified Roth withdrawals. It stands out by offering more flexible withdrawal rules than most retirement options. Mostly, when people just mention 457 plan, they actually mean 457(b) plan which is most common among employees.
Tax efficiency today or later: Pre-tax contributions lower your taxable income now, while Roth contributions offer tax-free withdrawals in retirement.
No early withdrawal penalty: You can access your money penalty-free upon leaving your job-even before age 59½.
Boost savings near retirement: Unique catch-up rules let you make larger contributions as you approach retirement or after age 50.
Standard limit: $23,500
Age 50+ catch-up: +$7,500 = $31,000 total
Super catch-up (ages 60–63): +$11,250 - increasing your total up to $34,750.
Final pre-retirement boost (last 3 years): You can contribute up to twice the standard annual limit ($47,000), based on any unused past contributions. You cannot combine this with the age-50+ catch-up.
Governmental 457(b): Offered by public agencies, protected from creditors and fully rollover-compatible with IRAs, 401(k)s, 403(b)s and other 457(b) plans.
Non-governmental 457(b): For high-level nonprofit employees, not creditor-protected and has limited rollover options.
457(f): An executive-only plan with deferred payouts contingent on meeting performance or service conditions.
Pre-tax & Roth options for flexible tax planning.
No 10% penalty on early withdrawals, unlike many other plans.
Qualified Roth withdrawals are completely tax-free.
Required Minimum Distributions begin at age 73 (rising to 75 by 2033).
Still subject to FICA, meaning Social Security and Medicare taxes still apply.
Tapping funds when you leave your job-no minimum age required.
Rollovers: Governmental plans can roll into IRAs and other qualified plans; nonprofit plans have fewer rollover options.
In-service access: Allowed in emergencies, small balances, or after age 73, depending on plan rules.
Loan options: Some plans allow loans for various needs, often with a standard 5-year repayment period.
Most 457(b) plans offer a variety of options, such as:
- Mutual funds (stock, bond and balanced)
- Target-date funds for automated asset allocation
- Fixed-income or stable value investments
- Brokerage windows and growing ESG-focused funds
Plan sponsors (employers) and third-party administrators (TPAs) handle compliance, investment lineups, record-keeping and fee transparency. Fiduciaries ensure the plan serves employee interests.
Double-dipper strategy: A 52-year-old teacher contributes $31k each to both a 403(b) and 457(b), maximizing retirement savings in 2025.
Early retirement flexibility: A firefighter retiring at 55 uses their 457(b) without penalty while waiting on pension or Social Security.
Final savings push: A public official aged 60–63 boosts contributions to $34,750 annually before retiring.
Creditor caution: A nonprofit exec keeps retirement funds diversified to reduce exposure since their 457(b) could be claimed by creditors.
Separate limits from 401(k)/403(b) - allows contributions to multiple plans
No early-withdrawal penalty, unlike most retirement plans
Special catch-up features near retirement make it stand out
Employer contributions count toward your total contribution limit
RMD age increased to 73, jumping to 75 by 2033
Mandatory Roth catch-up for high earners (over $145k FICA wages) starts in 2026
Roth catch-up becomes more common as plans offer better tax-planning flexibility
Auto‑features like enrollment and escalation are on the rise to boost participation
Focus shifting to decumulation strategies to support retirees during withdrawal years
Max out contributions, especially if also using other retirement accounts
Lean into Roth if you expect higher taxes later
Use the super catch-up at ages 60–63 if available
Coordinate rollovers when changing jobs or retiring
Review fees regularly-lower fees add up over time
A 457(b) plan is more than just another retirement account-it’s a powerful, flexible tool that offers tax advantages, no early withdrawal penalties and strategic catch-up opportunities. When used effectively alongside other plans, it can significantly enhance retirement preparation-especially for those eyeing early retirement or career transitions.
What is a 457(b) Plan and how does it work?
A 457(b) Plan is a tax-advantaged retirement savings plan for government and nonprofit employees. You defer part of your salary (pre-tax or Roth), invest it and let it grow. You can withdraw money penalty-free after leaving your job, regardless of your age.
What are the contribution limits for a 457(b) Plan in 2025?
In 2025, the standard elective deferral limit is $23,500. Those aged 50+ can add a $7,500 catch-up. If you’re age 60–63, a ‘super catch-up’ raises your limit by $11,250 (up to $34,750). In your last three years before your plan’s retirement age, you may have the option to use the final-year catch-up and contribute up to $47,000, but you can’t combine it with the age-50+ catch-up.
What tax advantages does a 457(b) Plan offer?
Contributions are made either pre-tax—lowering your current taxable income—or Roth, for tax-free withdrawals later. Earnings grow tax-deferred and you avoid the 10% early withdrawal penalty typical of 401(k)s when you separate from service.
Can I withdraw from my 457(b) Plan while still employed?
Yes, if your plan allows in-service withdrawals. Many government-sponsored 457(b) plans permit distributions for emergencies, small account balances, or after reaching your plan’s retirement age—without age-based penalties.
What happens to my 457(b) Plan if I switch jobs?
You can leave the account where it is, or roll it over into your new employer’s 457(b), an IRA, or even a 401(k)/403(b) if allowed. Each option has its own tax implications, rules and potential costs, so weigh them carefully.
Who is eligible for a 457(b) Plan?
Eligibility typically includes full-time employees of state and local governments and select nonprofit organizations. Check with your employer to confirm whether you’re eligible.
What investment options are offered in a 457(b) Plan?
Most plans offer diversified investment choices like equity and bond mutual funds, target-date or asset-allocation funds, stable-value or fixed-income products, brokerage windows and increasingly ESG (environmental, social, governance) options.
How do I roll over my 457(b) Plan into another retirement account?
Contact your plan administrator to initiate a trustee-to-trustee rollover. You’ll need to confirm that the receiving account—such as an IRA or another qualified plan—accepts 457(b) rollovers to preserve your tax advantages.
How does a 457(b) Plan differ from a 401(k)?
A 457(b) is for public-sector or nonprofit workers and offers its own contribution limits separate from 401(k)/403(b). It allows penalty-free withdrawals after job separation and offers special catch-up opportunities that aren’t available in most private-sector plans.
Can I use multiple retirement plans alongside a 457(b)?
Yes—you can max out a 457(b) and still contribute up to the limit in a 401(k) or 403(b). The IRS treats them separately, giving you more room to save.
What are the top benefits of enrolling in a 457(b) Plan?
A 457(b) gives you flexible tax options (pre-tax or Roth), penalty-free access after leaving your job, strong catch-up rules, independent contribution limits and diverse investment choices—making it a smart vehicle for boosting retirement readiness.