What Is a 457(b) Plan? Rules, Contributions, and Withdrawals

A 457(b) is a tax-advantaged retirement savings plan available to employees of government organizations and certain nonprofit organizations. Like a 401(k), a 457(b) allows eligible employees to save and invest for retirement through payroll deductions. Depending on your plan, contributions may be made on a pre-tax basis (allowing for tax-deferred growth) or an after-tax Roth basis (which may allow for qualified tax-free withdrawals).¹

A 457(b) plan works by allowing you to contribute a portion of your paycheck to a retirement account through your employer. Participation usually starts by choosing a dollar amount or percentage to contribute each pay period. Your contributions (known as elective deferrals) are then deposited into your 457(b) account and invested according to your selections. 
 
Your employer sponsors the plan, chooses the plan provider, and determines which investment options are available. In some cases, your employer may also contribute to your account.

Eligibility for a 457(b) plan is based on the type of employer you work for. Unlike a 401(k) plan, which is available to private sector businesses and their employees, the 457(b) is reserved for specific categories of government and nongovernment workers.

If you work for a state, county, or city government, or a local school district, you likely have access to a governmental 457(b) plan. This includes public sector employees, such as police officers, firefighters, teachers, and administrative staff. Governmental 457(b) plans are generally considered secure because the assets are held in a trust for the exclusive benefit of the participants.

Highly compensated employees or executives at certain nonprofits, such as tax-exempt hospitals, universities, or charities, may have access to a nongovernmental (private) 457(b) plan. These plans are sometimes called "Top Hat" plans. Nongovernmental 457(b)s are designed specifically for certain tax-exempt organization employees and carry different legal protections, compared to governmental versions.

The IRS sets yearly limits on how much you can contribute to your 457(b), much like other retirement savings plans, such as a 401(k) or a 403(b). But unlike most plans, 457(b)s have a separate maximum contribution amount, which means you can contribute the full maximum to your 457(b), plus another full maximum to your 401(k) or 403(b) plan, if you have one. This special rule for 457 plans can potentially double the amount you're allowed to save in tax-advantaged retirement accounts each year. On top of this, you may be eligible for catch-up contributions.

Employer contributions to a 457(b) generally count toward the plan's basic annual contribution limit. That means if your employer contributes to your 457(b), the amount you can contribute from your own pay under that basic limit may be reduced. 

For example, if the annual 457(b) contribution limit is $24,500 and your employer contributes $5,000, you may be able to contribute up to $19,500 from your own pay before any eligible catch-up contributions are considered. 

If, however, you're eligible for catch-up contributions, you may be able to contribute more than the basic annual limit. Special 457(b) catch-up rules are more complex and may take employer contributions into account. 

Check your plan documents or ask your employer how employer contributions and catch-up contributions are coordinated under your plan. 

If your employer offers both traditional and Roth contribution options, you can choose whether to receive a tax benefit now or potentially later in retirement.  

Traditional 457(b) contributions are generally made with pre-tax dollars, which can reduce your taxable income now. Roth 457(b) contributions are made with after-tax dollars, so they won't lower your taxable income today, but qualified withdrawals are generally tax-free.¹ Roth 457(b) options are generally available only in governmental plans.  

The choice between traditional and Roth contributions generally depends on when you'd prefer to receive the tax benefit. Traditional contributions may make sense if you expect your tax rate to be lower later, while Roth contributions may be worth considering if you expect your tax rate to be higher in the future or value tax-free qualified withdrawals.¹

Yes. 457(b) contribution limits are separate from 401(k), 403(b), and individual retirement account (IRA) limits. Contributions to a 401(k), 403(b), or IRA generally do not reduce how much you can contribute to a 457(b). 

For example, some employers offer both a 457(b) and a 401(k) or 403(b). If you're eligible for both, you may be able to contribute to both plans in the same year.  

Traditional IRA deductions may be limited based on your income, while Roth IRA eligibility phases out at certain levels depending on your modified adjusted gross income (MAGI) and tax filing status. 

While the goal of a tax-advantaged account is to leave your retirement savings invested for as long as possible, it's also important to know the rules for withdrawing your money, including tax rules and penalties that could affect your financial goals.

One of the main benefits of a 457(b) plan is that you can generally take withdrawals after leaving the employer that sponsors the plan without owing a 10% early withdrawal penalty, even if you're under age 59½. However, your distributions will be taxed as ordinary income, unless they're qualified Roth distributions.¹ For nongovernmental plans, your money will usually be taxable in the year it's made available to you, even if you don't take a distribution.

Some 457(b) plans may allow withdrawals while you're still employed, if you experience an unforeseeable emergency. The IRS defines this as a severe financial hardship resulting from illness, accident, or property loss. These are not as flexible as 401(k) loans, so they should be treated as a last resort.

Governmental 457(b) plans generally allow rollovers into another eligible retirement account, such as an IRA, 401(k), 403(b), or another governmental 457(b). Rolling pre-tax assets into a Roth account will usually trigger taxes. 

Nongovernmental 457(b) plans generally do not allow rollovers to IRAs, 401(k)s, or 403(b)s. Distribution options are usually controlled by the plan's terms, so review your plan documents carefully. 

Governmental 457(b) plans generally require you to take required minimum distributions (RMDs) starting at age 73 (or 75, if you were born in 1960 or later).  

Nongovernmental 457(b) plans do not require RMDs. Instead, distributions are generally governed by the plan's terms and may be required when the funds are made available to you. 

A 457(b) and a 401(k) are both tax-advantaged workplace retirement plans, but they differ in a few key ways. A 457(b) is generally available to certain government and tax-exempt organization employees, while a 401(k) is more commonly offered by private-sector employers. 
 
One important difference is that 457(b) contribution limits are separate from 401(k) contribution limits. If you're eligible for both plans, you may be able to contribute to each in the same year. For example, in 2026, that could mean contributing up to $24,500 to a 457(b) and another $24,500 to a 401(k), for a total of $49,000, before any eligible catch-up contributions.  
 
Another key difference is how withdrawals are treated after you leave your job. A 457(b) generally allows you to take withdrawals without owing a 10% early withdrawal penalty, even if you're under age 59½. By contrast, early withdrawals from a 401(k) may be subject to a 10% penalty, unless an exception applies.

A 457(b) can offer flexibility and tax advantages, but it may also come with tradeoffs. Some of the biggest considerations include creditor risk for nongovernmental plans, limited rollover flexibility, and investment costs that vary by employer.

If you have a nongovernmental 457(b), the funds technically remain the property of your employer and are subject to the claims of the employer's creditors. This unfunded status is required by the IRS and means that if the nonprofit goes bankrupt, your retirement savings could be at risk.

If you have a nongovernmental 457(b), you generally can't roll the account into an IRA, 401(k), or 403(b). That can make it harder to consolidate retirement savings after leaving your employer and may limit your flexibility compared to other workplace retirement plans.

While some plans offer low-cost index funds, others may have higher administrative fees or limited choices. Review the investment choices provided by your employer, including any costs or fees. Compare these costs against other retirement savings options or speak with a financial advisor to help ensure your savings aren't unnecessarily diminished by high expenses.

One of the biggest advantages of a 457(b) plan is that its contribution limits are generally separate from 401(k) and 403(b) limits. If you're eligible to participate in multiple workplace retirement plans, a 457(b) may allow you to save more in tax-advantaged accounts each year. 

Governmental 457(b) plans may also offer more flexibility when it comes to withdrawals after leaving your employer. Before contributing, review your plan's rules, investment options, fees, and whether your plan is governmental or nongovernmental.