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Enter annual salary$
2025 limit: $23,500 | Age 50+ catch-up: +$7,500 | Special 3-yr catch-up: up to 2×
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Historical S&P 500 avg: ~10% (7% inflation-adjusted)
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Government 457(b) plans rarely offer employer match
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Projected 457(b) Balance at Retirement
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What Is a 457(b) Plan?
A 457(b) plan is a tax-advantaged retirement savings account available to state and local government employees (e.g., teachers, police, firefighters, municipal workers) and certain nonprofit employees. It works similarly to a 401(k) or 403(b) but has a critical advantage: no 10% early withdrawal penalty if you separate from service, regardless of age.
457(b) Key Features (2025)
Future Value = PV × (1+r)^n + PMT × ((1+r)^n − 1) ÷ r
2025 Contribution Limit: $23,500 | Age 50+ Catch-Up: +$7,500 = $31,000
Special 3-Year Catch-Up (within 3 years of normal retirement age): up to 2× annual limit = $47,000
Key advantage: contributions can be doubled if also enrolled in 401(k)/403(b) — each plan has its OWN limit
Special 3-Year Catch-Up (within 3 years of normal retirement age): up to 2× annual limit = $47,000
Key advantage: contributions can be doubled if also enrolled in 401(k)/403(b) — each plan has its OWN limit
457(b) vs 401(k) — Key Differences
- Early withdrawal penalty: 457(b) has NO 10% penalty upon separation from service. 401(k) charges 10% penalty before age 59½.
- Contribution stacking: 457(b) limits are SEPARATE from 401(k)/403(b) limits — eligible employees can max out both plans for up to $47,000/year (or $62,000 with catch-ups)
- Employer match: Government 457(b) plans rarely offer employer match; 401(k)s frequently do
- Plan assets: Government 457(b) assets are held in trust (protected from employer creditors); non-government 457(b) assets remain employer property until distributed
- RMDs: Required Minimum Distributions begin at age 73 (same as 401k after SECURE 2.0)
💡 Stacking Strategy: If you're a public employee with access to both a 457(b) AND a 403(b) or 401(k), you can contribute the maximum to BOTH — potentially saving $47,000+ per year in tax-advantaged accounts. This is one of the most powerful retirement savings opportunities available to government employees.
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Frequently Asked Questions
What is the 457(b) contribution limit for 2025?
The 2025 457(b) contribution limit is $23,500 for employees under 50. Employees aged 50 and over can contribute an additional $7,500 catch-up contribution, for a total of $31,000. Additionally, within the 3 years before your plan's normal retirement age, you may use the special catch-up provision that allows contributions up to twice the annual limit ($47,000 in 2025), subject to underutilized contribution room from prior years.
Can I have a 457(b) and a 401(k) at the same time?
Yes. If your employer offers both plans (or if you have another qualifying employer), you can contribute the maximum to both independently. This is a unique advantage of 457(b) plans — their contribution limit is completely separate from 401(k) and 403(b) limits. A public school teacher with access to a 403(b) and a 457(b) can contribute $23,500 to each, for a total of $47,000 in tax-deferred savings in 2025 — or $62,000 with full catch-up contributions.
Is there a penalty for withdrawing from a 457(b) early?
Government 457(b) plans have NO 10% early withdrawal penalty, regardless of your age, when you separate from service (quit, retire, or are let go). This is the most significant advantage over 401(k) plans. However, withdrawals are still subject to ordinary income tax. Non-governmental 457(b) plans (nonprofit organizations) do have early distribution restrictions and may be subject to the 10% penalty in some circumstances.
How does a 457(b) reduce my taxes?
Traditional 457(b) contributions are pre-tax, reducing your taxable income dollar-for-dollar in the year contributed. Example: Earning $80,000 and contributing $23,500 reduces taxable income to $56,500. At a 22% marginal rate, this saves $5,170 in federal taxes per year. The money grows tax-deferred until withdrawal at retirement, when it's taxed at your (presumably lower) retirement income tax rate. Some plans also offer Roth 457(b) — after-tax contributions with tax-free withdrawals.
When do I have to take Required Minimum Distributions from a 457(b)?
Required Minimum Distributions (RMDs) from government 457(b) plans must begin by April 1 of the year following the year you turn 73 (per SECURE 2.0 Act, effective 2023). If you are still working for the plan sponsor past age 73, you may be able to delay RMDs until you separate from service. RMD amounts are calculated using your account balance and IRS life expectancy tables. Failure to take RMDs results in a 25% excise tax on the amount not withdrawn.
What happens to my 457(b) if I change jobs?
If you leave your government employer, your 457(b) options are: (1) Leave money in the plan if the plan allows; (2) Roll over to another 457(b) with a new employer; (3) Roll over to a traditional IRA — note that once rolled to an IRA, the 10% early withdrawal penalty exception no longer applies; (4) Roll over to a 401(k) or 403(b); (5) Take a distribution (taxable, no 10% penalty for government plans). Carefully consider the early withdrawal penalty consequences before rolling to an IRA if you're under 59½.