Wealth &
Protection Planning

457(b)

Description

A 457(b) plan is designed for employees of city, county, and state government entities; as well as public schools and colleges.  It allows employees to make pre-tax salary deferrals of up to $18,500 (2018), $24,500 (if age 50 or older with $6,000 catch-up contribution) or 100% of compensation, whichever is less. 

Objective

This plan allows employees to save for retirement tax-deferred while reducing their taxable income.  A 457(b) plan can help employees supplement their state pension plans. 

Features
  • Tax Advantages - Employees can defer up to $18,500 (2018), $24,500 (if age 50 or older) of salary per year.  
  • Contributions - Some employers may choose to make contributions to your account.  
  • No 10% Early Withdrawal Penalty - An advantage of the 457(b) plan is that it is not subject to the IRS 59 1/2 withdrawal rule.  That means if employees reach a triggering event, such as early retirement or separation from service, they can withdraw their money from the plan without paying a 10% penalty to the IRS.  Like other pre-tax retirement plans, taxes still apply to the money withdrawn as contributions were made on a pre-tax basis. 
Additional Information

Public schools and colleges may offer both a 403(b) and a 457(b) plan. 

Contact a STRIVE Wealth Advisor for more information about 457(b) plans. 

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