A 457(b) plan is a type of tax-advantaged retirement plan primarily for state and local government employees, as well as employees of certain non-profit organizations. It is an employer-sponsored, IRS-sanctioned, tax-deferred savings account that allows you to make pre-tax contributions towards your retirement. The 457(b) plan is similar to a 401(k) or 403(b) plan, in that a 457(b) plan is offered through your employer, and your contributions are taken from your paycheck on a pre-tax basis, which ultimately lowers your taxable income.
One unique feature of the 457(b) plan is that in the three years before retirement, it allows 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.
The 457(b) plan is most often offered to civil servants, police personnel, and other employees of government agencies, public services, and nonprofit organizations such as hospitals, churches, and charitable organizations. It helps employees save for retirement while deferring the tax bill until they retire and start withdrawing the money.
