What is a 457(b) Account?
457(b) Retirement Plans
A 457(b) Plan is a tax-sheltered retirement plan that is available to employees of government and non-profit organizations. Typically, employee contributions are made on a pre-tax basis through a salary reduction agreement with the employer. Employees are eligible to contribute 100 % of includable compensation to a maximum of $19,500.
For employees age 50 or older, an additional $6,500 may be contributed. Section 457(b) plans do not have an excise tax for premature distribution, but withdrawals are typically not allowed before employment severance. Section 457(b) plans may provide a loan provision at the Plan’s discretion. Distributions from a 457(b) plan must begin no later than age 70 ½ or the year of separation, if later. If employees are considering retiring before age 60 and anticipate an income need, 457(b) plans allow for distribution prior to age 59 ½ and are not subject to a 10 percent federal tax penalty as are distributions from a 403(b) or IRA plan.
A Roth account allows you to set aside after-tax money. When you retire you can make tax-free withdrawals of principal, earnings, and interest. For more information about the benefits of a 457(b) Roth account, review the Valic flyer listed below.
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