457(b) – A Basic Guide

Though you’ve dealt with challenges aplenty in your lifetime, finally retiring your job and making the most out of your senior years is a step that’s especially hard. 

Unlike getting a job, maintaining a relationship, or starting a business, preparing for life as a retiree is something that isn’t supplemented with jobs or easy directions. Many older citizens, in fact, believe that this particular stage of their life can be the most difficult of all because of the unexpected challenges that school or life didn’t teach them about. 

Once you get into the groove of planning for retirement, there will be all sorts of challenges that you’ll need to overcome (such as pensions, estate planning, and the like). Among all the different hurdles that you’ll need to face for a much smoother post-work life, however, the most difficult of them all is paperwork—especially in the case of the 457(b). 

What is it, in the first place?

The 457(b), simply put, is a tax-advantaged retirement plan primarily available for civil servants, municipal employees, law enforcement officers, and public safety personnel. Apart from the above-mentioned professionals, it is also available to hospital executives, charities, unions, and independent contractors employed by state and local government bodies.

Similar to other employer-sponsored retirement plans, this option provides tax-efficient growth for retirement savings—which goes a long way in ensuring post-work life comfort. With this option, you don’t have to pay capital gains taxes on the investments you buy and sell in your account so that you can give your retirement nest egg additional room for growth!

How Are the Contributions for This Retirement Plan Taken?

Generally speaking, contributions to your 457(b) retirement plan are deducted from your paycheck. In terms of government dues, you can be taxed on your returns in one of two ways: 

  • The Traditional 457(b): With this option, your contributions are taken out of your paycheck before taxes—which lowers your overall tax bill during salary payouts. Once you take out the money in retirement, you end up paying income taxes on the withdrawals.
  • Roth 457(b)s: With this option, you fund your account with money that’s already been taxed in exchange for tax-free withdrawals in retirement. Typically, this includes any earnings your money makes while it’s in your 457(b). (However, it’s vital to note that not all organizations permit you to make Roth contributions to a 457(b) account.)

The Current Contribution Limits of the 457(B) Retirement Plan

In the year 2021 (and onwards until the next update), the annual contribution limit for a 457(b) plan was set at $19,500. This particular limit includes both employer and employee contributions—even though employers rarely contribute to 457(b) accounts. However, employees aged 50 and older may make additional “catchup” contributions of $6,500—which adds up to a contribution limit of $26,000!

What Can You Do With Your Plan?

Aside from catch-up contributions, 457(b) plans can be maximized in an assortment of ways to increase the amount that you end up getting upon retirement.

With these solutions, qualified professionals and workers can capitalize on offer unique features that can help them save up a lot more for retirement in addition to their already-applied measures. Let’s go over these unique options briefly: 

  • In the three years before retirement, the 457(b) plans allow you to contribute up to double the annual limit or 100% of your salary (whichever is less). These additional contributions, however, cannot exceed the value of unused eligible contributions from previous years— this means an employee contributing a maximum amount every year can’t use these double contributions.
  • If a holder has access to another employer-sponsored retirement plan—such as a 403(b)—they are allowed to contribute the employee maximum to both plans. For instance: in 2021 you could contribute $19,500 to a 457(b) and $19,500 to a 403(b). 

How Can You Get Started?

If you’re looking to start your 457(b) plan up to build a much larger nest egg to benefit from during your retirement, then it’s best to enlist the services of a trusted pension expert. With the help of My State Pension’s professionals, for instance, you’ll be able to easily and smoothly set up your fund and maintain it every year for the best outcome on your contributions!


While there are many different things that you’ll need to worry about during your retirement, the one factor that you should definitely focus on above all else is building a 457(b) plan. Through the help of the key points mentioned above, you can get started on your planning process and make the most informed decisions moving forward!

My State Pension provides can connect you with top quality licensed agents or registered investment advisors for your retirement planning needs. Get in touch with us today to schedule an appointment with one of our network of representatives!

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If you are a K-12 educator or staff, collegiate educator or staff, municipal or state employee we can connect you with a licensed financial professional with the experience needed to help you understand your pension benefits and overall retirement plan.