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457 plans are offered by state and local governments and some non-profits. These are pre-tax accounts; just like 401(k) and 403(b) plans, contributions come from your paycheck before income tax is withheld, but you will pay taxes when you withdraw the money in retirement. But in the meantime, the account is allowed to grow tax-deferred. There are two types of 457 plans- 457(b) offered to state and local government employees, and 457(f) offered to highly compensated government and select non-government employees.[1]

Key aspects of 457(b) plans:

Updated For 2024: Yearly contribution limits are $23,000 for people younger than 50 and an extra $7,500 catch-up amount for those 50 and older for 2024. Contributions are made from January to December of that year.[2]
Unique to 457(b) plans: Unlike 401(k)s and 403(b)s, in a 457(b)-plan, employer and employee contributions count towards the $23,000 limit for the under 50 and towards $30,500 for the over 50. So, for example, if you are 35 and your employer adds $10,000, you can only add $13,000. These plans rarely match.[3],[4]
Updated For 2024: 457(b) plans feature a “double limit catch-up” provision. This catch-up allows employees within three years of retirement age (as specified in their plan) to contribute $46,000 in 2024, twice the annual contribution limit.3,[5]

If you have access to another employer sponsored plan like a 401(k) or 403(b), you can contribute the maximum amount ($23,000 in 2024) to each plan. The $7,500 over 50 catch-up can only be contributed to one of the plans if applicable.[6]

  • If you leave an employer, you can take your money with you.[7]
  • 457(b) plans investment options are generally limited to annuities and mutual funds. The also can have Roth contribution options in some plans.[8],[9]
  • You can make penalty-free withdrawals at any age. These funds often cover high-risk professions like firefighters who work these careers for set times like 20 or 25 years; because they might only work from 21 to 46 years old, they need to access retirement funds before 59 ½.[10]
Secure Act 2.0 Change: Required Minimum Distributions (RMDs) need to start at 70 1/2 if you were born before 7/1/49; 72 if you were born on or after 7/1/49 or in 1950; 73 if born between 1951 and 1958; 75 if born in 1960 or later. If you were born in 1959, federal guidance is needed to determine if your Required Beginning Date is age 73 or 75. [11],[12]
  • You can take a low-interest loan on 457(b) accounts, up to $50,000 or 50% of your account balance. You can take out the total amount if your balance is $10,000 or less. You will have to pay back the loan within five years (this period may be extended if the money is used to buy a primary home) or leave that job, or it becomes taxable income. The payments will most likely be held back from your paycheck.[13]


Key aspects of 457(f) plans:

Unique to 457(f) plans: 457(f) plans are employed to establish “golden handcuffs” for executives, linking retirement benefits to extended service or providing bonuses for shorter-term commitments. These funds typically represent supplemental compensation for the employee without jeopardizing their regular income. Unlike 401(k)s, 403(b)s, or 457(b)s, 457(f) plans do not have contribution limits. Though employees can defer any amount they choose to this account to grow tax-deferred until distribution, there are forfeiture rules. “Risk of forfeiture” means if you don’t fully honor your contract duration or employment standards, you can risk losing the entire amount of your account.[14],[15]
  • Whether or not you move on to a new employer, your money will stay with this plan. And if you don’t meet the terms of your employment contract, you can forfeit the entire account.9
  • 457(f) plan investment options are broader than 457(b) and range from fixed or variable annuities, mutual funds, and even life insurance.9
  • With the 457(f) plans, you can also fund a 401(k) or IRA. 9,[16]
  • The employer owns the 457(f)-account money until it is distributed, and often you, as the employee, are 0% vested until their distribution. However, some plans offer an incremental vesting schedule. In addition, because your employer owns it, these funds are available to the company’s general creditors in the event of litigation or bankruptcy.[17]
  • You can make penalty-free withdrawals at any age if your employment contract is met. 11
  • Loans are not available. 11
  • Required Minimum Distributions (RMDs) rules do not apply to 457(f) plans. 11
  • It is vital to understand the details of your specific plan so as not to risk forfeiture. 11


  • With all investment accounts, you expose some or all your invested money to loss for the chance to earn a higher profit. Investment gains hinge on an ongoing and long-term investment strategy that uses your risk tolerance and diversification to mitigate some risks. Even with these in place, you are exposing your money to loss.[18]
  • Matching is not standard for these types of plans. Employers often limit their role and do not provide employer contributions to the plan to remain exempt from ERISA rules. Employee Retirement Income Security Act (ERISA) of 1974 rules were implemented to safeguard employees who participate in employer-run retirement plans.[19]
  • Profit-sharing, where a company offers stock options to its employees, is not available with these types of plans since these organizations are non-profit or governmental.[20]
  • The distributions are reported on a W-2, not a 1099, unless a beneficiary requests the distribution; because of the distribution method, you will pay Social Security tax on all distributions. 11

If you would like to explore additional retirement investment accounts that could work for your personal goals, Scarlet Oak Financial Services can be reached at 800.871.1219, or you can contact us here.  To sign up for our weekly newsletter with the latest economic news, click here. 


















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This material has been prepared for informational purposes. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on individual circumstances.