457(b) Deferred Compensation Plan: Who Qualifies and What You Get
Learn how government employees can use this plan to save pre-tax money for retirement without the usual age-related penalties.
A 457(b) Deferred Compensation Plan is a way for certain government workers to set aside a portion of their salary for retirement before taxes are taken out.
Who it's for
This plan is designed for government employees. This includes specific roles such as firefighters.
What you get
You can contribute money to this plan from your paycheck before it is taxed, which lowers your current taxable income. When you eventually leave your job, you can access these savings to fund your retirement.
What it costs you
The cost to you is a portion of your regular pay, which is taken out via a payroll deduction. The specific amount you contribute and any associated fees will vary depending on your specific plan provider.
The catch to know
A key difference between this and a 401k is how you access your money. With this plan, you can generally withdraw your funds without paying the usual early-withdrawal penalties once you have separated from your employer, regardless of your age.
How to apply
- Check with your employer's benefits department to see if you are eligible.
- Review the specific rules and deduction amounts offered by your plan provider.
- Select the amount you wish to have deducted from your paycheck.
- Monitor your account regularly to manage your savings goals.