A 457(b) plan is an employer-sponsored, IRS-sanctioned, tax-deferred savings account that allows you to make pre-tax contributions towards your retirement.
With 457(b) plans, you contribute pre-tax dollars, which won't be taxed until you withdraw the money, unless it's a Roth 457(b), which you fund with after-tax money.
There are two types of 457(b) plans, governmental and non-governmental 457(b) plans. Governmental plans are backed by the government, and non-governmental plans are backed by employer.
457(b) plans are generally available for state and local government employees, as well as certain non-profit organizations tax exempt under IRC Section 501.
Participants can contribute as much as 100% of an their compensation, or $22,500 in 2023, whichever is less. If you're age 50 or older, it increases by an additional $7,500.
You may be able to withdraw funds in your 457(b) account penalty-free before you reach age 59½. You can begin withdrawing funds whenever you stop working at your employer.
If you need to withdraw your retirement funds from a 457(b) before age 59½ because you leave a job or retire early, you won't pay a 10% tax penalty.