457(b) Plan
A 457(b) plan is a deferred compensation retirement plan for state and local government employees with a major advantage of no 10% early withdrawal penalty after separation from service.
Exam Tip
KEY: 457(b) has NO 10% early withdrawal penalty after separation. Contribution limit is SEPARATE from 401(k)/403(b).
What is a 457(b) Plan?
A 457(b) plan is available to government employees. The most significant advantage is NO 10% early withdrawal penalty after leaving employment.
2025 Limits
| Contribution Type | 2025 Limit |
|---|---|
| Standard Deferral | $23,500 |
| Age 50+ Catch-Up | +$7,500 |
| Three-Year Pre-Retirement | Up to $47,000 |
No 10% Penalty
| Plan Type | Early Withdrawal Penalty |
|---|---|
| Governmental 457(b) | NO penalty |
| 401(k), 403(b), IRA | 10% penalty before 59½ |
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Related Terms
401(k)
A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute pre-tax dollars, with potential employer matching, and tax-deferred growth until withdrawal.
403(b) Plan
A 403(b) plan is a tax-advantaged retirement savings account for employees of public schools, tax-exempt organizations, and certain ministers, allowing pre-tax contributions up to $23,500 in 2025.
Catch-Up Contributions
Catch-up contributions allow workers age 50+ to contribute extra amounts above normal limits to retirement accounts including 401(k), IRA, and 403(b) plans, with SECURE 2.0 adding super catch-up for ages 60-63.
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