Typical Employers
Employees of state and local governments, as well as certain tax-exempt organizations — including many schools and educational institutions.
How 457(b) Plans Work for Educators & Public Employees
For Educators & Public Employees
How 457(b) Plans WorkDeferred Compensation, Separate Limits
A 457 plan (also called a 457(b) deferred compensation plan) is a valuable retirement savings option for many public employees and educators. Here’s how these plans work.
Who Is Eligible?
Confirm With Your Employer
Availability is plan-specific. Check with your district, municipality, or benefits office to confirm whether a 457 plan is offered to you.
How Do They Work?
You contribute pre-tax dollars directly from your paycheck, which lowers your taxable income for the year. Your contributions and any earnings grow tax-deferred until you withdraw the money in retirement.
2026 Contribution Limits
Annual limit (lesser of 100% of includible compensation or)$24,500
Age 50+ catch-up (if plan allows)+ $8,000
Ages 60–63 “super” catch-up (if plan allows)+ $11,250
Special 457 catch-up (3 years before normal retirement age)Up to $49,000
The special 457 catch-up is available to eligible participants who under-contributed in prior years and may allow up to twice the regular limit. Plan rules control which catch-ups you can use.
Key Features of 457 Plans
Tax Advantage
Pre-tax contributions reduce your current taxable income. Many governmental 457 plans also offer a Roth option, where you pay taxes now and qualified withdrawals in retirement can be tax-free.
Investment Choices
Most plans offer a range of mutual funds and other investment options. The lineup and fees vary by vendor, so the specific plan matters as much as the plan type.
Withdrawals
Distributions are generally taxed as ordinary income. Unforeseeable emergency withdrawals and distributions after separation from service are typically permitted.
No 10% Early-Withdrawal Penalty
Unlike most other retirement accounts, governmental 457(b) plans do not apply the 10% early distribution penalty when you leave your employer, even if you are under age 59½. Ordinary income tax still applies.
Why the Separate Limit Matters
Because the 457 contribution limit is separate from 403(b) and 401(k) limits, many educators and public employees who have access to both a 403(b) and a 457 can contribute the maximum to each plan in the same year.
Related Guidance for Educators
403(b) vs 457(b)
Side-by-side snapshot of limits, catch-ups, and withdrawal rules.
403(b) Tax-Sheltered Annuity Overview
How the companion plan works for school and nonprofit employees.
Complimentary 403(b) Checkup
A short review of fees, options, and next steps.
Financial Planning for Teachers
How pension, 403(b), and 457 pieces fit together.
Frequently Asked Questions
Employees of state and local governments, as well as certain tax-exempt organizations — including many schools and educational institutions. Check with your employer to confirm whether a 457 plan is available to you.
In 2026, the annual contribution limit is the lesser of 100% of your includible compensation or $24,500. Additional catch-up opportunities may be available if your plan allows them, including an age 50+ catch-up of up to $8,000, an ages 60–63 catch-up of up to $11,250, and a special 457 catch-up in the three years before normal retirement age.
Unlike most other retirement accounts, governmental 457(b) plans do not apply the 10% early distribution penalty when you leave your employer, even if you are under age 59½. Ordinary income tax still applies to traditional balances.
Yes. Because the 457 contribution limit is separate from 403(b) and 401(k) limits, many educators and public employees who have access to both a 403(b) and a 457 can contribute the maximum to each plan in the same year.
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This page provides general educational information about 457(b) plans. It is not personalized advice, a recommendation, or a guarantee of any specific outcome. Contribution limits, catch-up rules, and tax treatment depend on current law and your employer’s plan document. Consult a qualified professional before making decisions.
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