The Advantages of a 457(b) Savings Plan
This voluntary, tax-deferred savings plan is a complement to existing retirement or pension plans which serve government workers.
Divisional Tax-Exempt Manager
This COVID pandemic has resulted in an unprecedented level of uncertainty which has been especially difficult for local government workers. They are having to contend with fewer job openings as governments freeze hiring and implement budget cuts.
All of this has triggered immense concerns about finances and the future. Balancing today's instability with planning for a secure retirement has been challenging.
A smart way to help you prepare for the future as you navigate today's uncertain environment is by participating in a 457(b). This voluntary, tax-deferred savings plan—designed for public service employees--is a complement to existing retirement or pension plans which serve government workers.
There are numerous benefits to enrolling in a 457(b). Chief among those:
- Ability to withdraw funds before age 60 penalty free. Unlike other retirement savings plans, such as 401(k) or 403(b), you can withdraw money from your 457(b) prior to age 59½ without being accessed a 10% penalty. However, you will still owe taxes on any withdrawal made at the time it's made.
- Reduce current tax bill. Contributing now reduces your tax burden today. Taxes are deferred at both the state and federal levels until you withdraw the money at a later date, typically when you reach retirement and are in a lower tax bracket.
Tax-deferred plans also are deducted directly from your salary before your employer withholds income tax—out of sight, out of mind. For 2021, you can
- Compound investments—no matter how large or small making regular contributions to a 457(b) will add up to a more financially secure future as the money you invest now will keep compounding as long as it's in the savings plan.
It's a good idea to enroll in a 457(b), even if you're on a tight budget. You don't have to commit to sizable contributions to make a difference for your future. You can start with $20 or $30 per pay period and increase the amount at any point when you feel comfortable doing so.
When it comes to retirement, most individuals want to be self-reliant. They don't want to rely on others or government programs to exist. They want to be in control of their own destiny, “pay for their life in the future” and be able to enjoy all that's possible, only limited by their imaginations.