What is the Difference Between the 457 Plan and 403(b) Plan

Everyone wants to retire while feeling secure, as unease can be a stressful burden. Part of having a retirement plan is prepping a considerable amount of savings, which can be difficult for most people in the public sector. There is the pension that can seem like a light at the end of the tunnel but explore other means too.

Understanding and optimizing your savings for retirement as a government employee is important, and two employer-sponsored plans can help do just that. If you want to learn more about the 457 and 403(b) Plans while checking out how they vary from one another, continue reading this article.

457 Plan Definition 

The 457 plan is an employee retirement plan where people can contribute part of their salary to their savings. Employers from the state and local government, as well as non-profit organizations, offer these retirement plans. This can be extremely helpful as you claim several tax advantages, such as deferred compensation.

There are two kinds of 457 plans, and it’s worth assessing what is more well-suited to you and your contributions. The two types of 457 plans are:

457(b) Plan

A 457(b) plan is geared towards regular employers working for the state and local governments. Those who use this plan can give contributions a little over $19000. Those still working in and beyond their 50s can still make cash contributions of up to $6500.

The retirement age in the US is 66 years old and two months. Those 63 years old and two months can opt to contribute more under the 457(b) plan. There are regulations about your maximum contribution in those three years before retirement. Be sure to consult specialists who can assist you. 

457 (f) Plan

A 457(f) plan is more for private executives who are trying to be recruited by the public sector. The retirement benefits and having them deferred from taxes can be extremely enticing, though there is a catch. 

Unlike with 457(b) plan where the benefits come regardless, executives will have to meet certain performance standards and metrics to qualify. When they can, they forfeit their chances of the benefits.

403B Plan Definition 

The 403(b) plan is a little similar to the 457(b) plan the most, as both are offered to government and nonprofit employees. The 457(b) plan is also extended to public school employees. This allows workers to undergo a tax-deferred annuity or TDA plan.

The 403(b) plan allows participants to get employers to store away money for retirement. There are existing limits though, such as how deferred compensation is made on a pre-tax basis. There are rare cases of after-tax contributions, but amounts are subject to correction.

The Ideal Plan

The main thing that government and nonprofit workers have to look at is the eligibility of each plan, along with whether they qualify. Discussing with a specialist can help lead you to the best retirement option for you at this point in time.

There is a possibility that one can qualify for two plans at the same time. In those cases, a worker would have the option of participating in those two chosen plans, splitting their contributions among the two. This would provide benefits in terms of taxes.


Even if you’re a while away from retirement, it’s best to be prepared early on. Learning what the best plan is for you would be best for your peace of mind. Whether it’s a 457 plan or you end up taking a 403(b) plan, start looking into it. 

In need of retirement planning for government employees in the US? My State Pension can connect you with a licensed agent or registered investment advisor that specializes in retirement planning for workers in the education sector along with the state and municipal governments. Contact us today!

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