Definition
A retirement plan offered by some government or nonprofit employers. Similar to a 401K, you can contribute part of your paycheck before taxes.
What to consider
- Check the specific rules and limits—it might work differently than a 401K.
- Know whether you can roll it over if you leave your job.
- Understand any early withdrawal options or penalties.
Real world scenarios
- Gabriella, a city government employee, enrolls in a 457(b) plan in addition to her pension. She values the tax-deferred growth and the extra retirement savings.
- To compare options, Jason looks at both his 401K and a 457(b) plan available through his nonprofit employer. He balances the different contribution limits to maximize his total savings.
- Mia redirects a portion of each paycheck into her 457(b), reducing her taxable income. Years later, she’s grateful for the substantial nest egg this plan helps her accumulate.
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