457(b)plan
Maximize your retirement savings
Take your retirement planning to the next level with a 457(b) plan, which can help you increase your retirement savings while providing potential tax benefits and much more.
457(b)overview
What is a 457(b) plan?
While a 457(b) plan is similar to traditional retirement plans like 403(b) and 401(k), it has unique advantages regarding withdrawals and contribution limits. A 457(b) plan is a tax-advantaged, deferred compensation retirement plan primarily offered to public/governmental employees as well as select employees at private, tax-exempt (nonprofit) organizations.
benefits
Advantages of a 457(b) plan
Save more for retirement
You can potentially double your annual retirement savings by contributing the maximum amount to both a retirement plan and a 457(b) plan. Catch-up contributions may be an option, too, based on your plan provisions.
Reduce your current tax bill
Every dollar you contribute to your 457(b) plan may reduce your current taxable income. Your contributions and any earnings are tax-deferred1 until withdrawal, providing the potential for compound growth.
Bridge your retirement income gap
IRS limits prevent many high earners from saving enough through traditional plans. A 457(b) can help close the gap between your current income and what you’ll receive from Social Security and your standard retirement benefits.
plan types
Different plans for different employers
There are two types of 457(b) plans.
Private Employer/Tax-Exempt 457(b) plans
Designed for select management and highly compensated employees, these plans offer an exclusive opportunity to increase tax-deferred retirement contributions.
Public Employer/Governmental 457(b) plans
These plans are designed to provide broader access to increased tax-deferred retirement savings for eligible public sector employees.
contributions
How much can you put into your 457(b)?
Employees with a 457(b) deferred compensation retirement plan can contribute up to the annual IRS limit, which is adjusted periodically for inflation.
Those who are within three years of the plan's normal retirement age and haven't maximized contributions in previous years may be eligible for a special catch-up provision that may allow for increased contributions. Additionally, those who are participating in a 457(b) public plan (age-based catch up contributions aren't permitted in private tax-exempt plans) and are age 50 or older may qualify for an age-based catch-up contribution, though the two types of catch-up contributions can't be used simultaneously.
Your specific contribution limit will depend on your age, years of plan participation, and previous contribution history. It's important to check with your plan administrator or review your plan documents to understand which limits apply to your situation, as contribution rules can vary based on your individual circumstances and your employer's plan design.
withdrawls
Rules for taking money from your 457(b) plan
Background info
- You can withdraw money from your 457(b) penalty-free after you separate from the plan sponsor.
- Distributions must be reported as taxable income.
Tax implications
- Consider the tax liability when determining your form of distribution from the plan.
- Consult with your own tax advisor to determine what is appropriate for you.
Unforeseeable emergency distributions
- If you’re impacted by an illness or other unforeseeable event, you may qualify for early, penalty-free withdrawals.
- Consult with your tax advisor to determine any tax consequences for unforeseeable emergency distributions.
RMDs (Required Minimum Distributions)
- To avoid costly penalties, you must start taking withdrawals to satisfy RMD from your 457(b) by April 1 following the calendar year you turn 73.
- Exception—you’re not required to take RMDs if you're still working for the plan sponsor.
compare options
457(b) plans compared to other tax-deferred plans
Check out how a 457(b) plan measures up to other comparable options.
401(k) or 403(b) plan |
457(b) Tax-Exempt/Private plan |
457(b) Governmental/Public plan |
|
Employee contributions |
Special limits on how much you can save each year; 403(b) can include service based catch-up contributions; age-based catch-up contributions may be permitted in either a 401(k) or 403(b) |
Separate limits to grow your money beyond your 401(k) or 403(b); special catch-up contributions may be available and employer contributions are allowed |
Separate limits to grow your money beyond your 401(k) or 403(b); special catch-up contributions or age-based catch-up contributions may be available and employer contributions are allowed |
Early withdrawals |
10% penalty before age 59 ½ (unless exceptions apply) |
No 10% penalty if you leave your job before age 59 ½ |
No 10% penalty if you leave your job before age 59 ½ |
Account ownership |
Assets are held for the exclusive benefit of plan participant |
Plan assets are owned by the employer and subject to the claims of creditors until paid or made available to the employee |
Assets are held for the benefit of plan participant |
take action
Ready to get started?
Take the next step in planning for your financial future. Schedule a complimentary one-on-one consultation with a TIAA financial consultant to explore how a 457(b)2 plan may fit your retirement strategy.
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faq
What people ask us
Can I contribute to both a traditional retirement plan and 457(b) plan?
Yes. For example, if your employer sponsors both a 403(b) and a 457(b), you are generally permitted to contribute up to the IRS maximum for both plan types.
How much can I contribute to my 457(b) plan?
Each year, the IRS publishes annual contribution limits. The current year limits can be found
Can I make Roth contributions to a 457(b) plan?
It depends. Roth contributions can only be made to 457(b) public plans and your plan must permit such contributions. To learn more about the plans available to you and their features, check with your employer or speak with a financial consultant.
When can I withdraw money from my 457(b) plan?
You can take withdrawals from your 457(b) plan in the following circumstances:
- Upon separation of service from your employer.
- After a certain age if you're still employed and allowed by the plan.
- In cases of an unforeseeable emergency if allowed by the plan.
For more information, check with your employer or speak with a financial consultant.
Is there a penalty for an early withdrawal from a 457(b) plan?
No. You can generally take a distribution from the plan upon separation of service from your employer without a 10% early withdrawal penalty. However, withdrawals are subject to ordinary income tax, and the penalty may apply if you’ve rolled over assets from a 401(k), IRA, or other retirement plan into a public 457(b) and withdraw them before age 59 1/2. To ensure you understand all applicable withdrawal rules, speak with a financial consultant.
1For state tax purposes, New Jersey and Pennsylvania do not allow for pre-tax contributions.
2Your employer must offer a 457(b) plan and you must meet the plan's eligibility requirements in order to participate.
This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.