Retirement Planning

Understanding a 457 Plan

Similar to a 401(k), a 457 Plan is a retirement savings plan that is typically offered to employees of state and local governments, and qualified non-profits.

What's a 457 Plan?

How it Works

If you work for state and local governments such as public schools, colleges, universities, charities, and other tax-exempt entities (under section 501(c) of the IRS code), you may have the option of contributing to a 457 retirement account.

Operating much like 401k retirement accounts, a 457 plan is a voluntary retirement plan. It allows you to make pre-tax contributions from your paycheck into an account that grows tax-deferred until it is withdrawn in retirement. At the time you begin to take distributions, you'll pay regular income taxes (regular meaning that you'll pay the current rate of interest at that time). And if you're lucky enough, employers may offer you a type of matching contribution, allowing you to save even more.

Contribution limits

These types of retirement accounts follow the same type of IRS limits as 401(k) retirement accounts, but only if it is the only retirement plan your company offers. If your employer offers other plans (such as a 401(k) or 403(b) plan), you have the added benefit of contributing to both retirement accounts and investing the maximum into each. This can give you a real advantage in catching up on your retirement savings if you've fallen behind. Note: IRS rules may differ from year to year, so be sure to check specific contribution limits by visiting the IRS website.

Early withdrawals

If you take an early withdrawal from your 457 plan (before you turn age 59 ½), you won't be subject to an early withdrawal penalty as with 401k retirement accounts. However, you will owe income taxes on the amount of your withdrawal.

For more information on retirement accounts and how increase your retirement savings, visit the Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

457 Plans

There are a variety of retirement accounts you can use to save for life after work. This article looks at the basics of what 457 retirement accounts are and how they work. For more information, visit our learning center.

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