457(b)

The 457 plan is a type of non-qualified tax advantaged deferred-compensation retirement plan that is available for governmental and certain non-governmental employers in the United States.

The employer provides the plan and the employee defers compensation into it on a pre-tax basis. For the most part the plan operates similarly to a 401(k) or 403(b) plan most people are familiar with in the US.

The key difference is that unlike with a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59½ (although the withdrawal is subject to ordinary income taxation). 457 plans (both governmental and non-governmental) can also allow independent contractors to participate in the plan where 401(k) and 403(b) plans cannot.

Written by
Nathan Tarrant
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Written by Nathan Tarrant