{"id":154,"date":"2020-10-31T12:00:12","date_gmt":"2020-10-31T17:00:12","guid":{"rendered":"https:\/\/teachingmillionaires.com\/?p=154"},"modified":"2021-02-23T18:43:23","modified_gmt":"2021-02-23T23:43:23","slug":"457-retirement-plan-explained","status":"publish","type":"post","link":"https:\/\/teachingmillionaires.com\/newstag\/457-retirement-plan-explained\/","title":{"rendered":"457 Retirement Plan\u2014EXPLAINED"},"content":{"rendered":"\n<figure class=\"wp-block-embed is-type-rich is-provider-embed-handler wp-block-embed-embed-handler wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"457 Retirement Plan EXPLAINED\" width=\"720\" height=\"405\" src=\"https:\/\/www.youtube.com\/embed\/1HqIGazBAq4?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>Here&#8217;s a breakdown of the 457b retirement plan &#8211; and how it can help employees of state and local governmental agencies save and invest for retirement.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What\u2019s a 457 Retirement Plan?<\/strong><\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>If you haven&#8217;t heard of a 457b retirement plan, don&#8217;t let all the numbers and letters confuse you.&nbsp; It works basically like a 401k in the business world or a 403b in the public sector.<\/p>\n\n\n\n<p>457 retirement plans are available to people in state or local government agencies.&nbsp; For example, teachers, police officers, firefighters, and nurses usually have access to 457b plans.&nbsp;<\/p>\n\n\n\n<p>A quality state-based 457 plan allows you to contribute money towards your retirement often with very low fees.&nbsp; But that\u2019s not even the best part &#8211; you&#8217;re allowed to access the money without penalty at any age so long as you separate service, which means you stop working and leave your job.<\/p>\n\n\n\n<p>This is like a superpower that most employees don&#8217;t have!&nbsp; Think about it, there are usually penalties for accessing retirement accounts before the age of 59 \u00bd, but that\u2019s not the case with a 457 retirement plan.&nbsp; Check with your own plan to be sure, but most allow you to access funds when you stop working and separate service.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What About My Pension and Social Security?&nbsp;<\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>Some of you might be thinking that you can just rely on a pension or Social Security, but some states don&#8217;t offer pensions and not all states offer Social Security.<\/p>\n\n\n\n<p>Another thing to consider is how long it takes to get full pension benefits.&nbsp; If you find yourself in the public sector, you often have to work 30-40 years before you hit the maximum pension age.<\/p>\n\n\n\n<p>Does the prospect of retiring before your sixties sound interesting to you?&nbsp; If so, let&#8217;s dig into some of the really interesting features of a 457b retirement plan.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Does a 457 Work If I Already Have a 403b?<\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>Many have heard of a 403b retirement account, and some people actually have access to both a 403b and a 457.&nbsp; If that\u2019s the case for you, and you\u2019re an ambitious saver, then you&#8217;re allowed to contribute to both accounts up to the IRS maximum for that current year.<\/p>\n\n\n\n<p>Currently, the maximum contribution limit for both the 403b and 457 retirement plans is $19,500.&nbsp; That limit often increases every few years.&nbsp; Hypothetically, if you max out both accounts, you could save close to $40,000 a year towards your retirement!&nbsp; That&#8217;s not going to be easy to accomplish or pull off, but it might be something worth investigating during those final few years of working.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Are There Special Catch-Up Contributions for the 457?<\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>Speaking of those final few years, some 457 plans offer two different types of special catch-up contributions.&nbsp; The first is an age 50 catch-up, meaning that anyone age 50 or older can contribute additional money.&nbsp; That amount is up to $6,500 right now.<\/p>\n\n\n\n<p>The second catch-up contribution allows you to contribute double the current IRS limit for your final three years of work before you retire.&nbsp; You heard that right!&nbsp; Some 457 plans let you contribution two times the maximum contribution limit those final three years before you retire.<\/p>\n\n\n\n<p>Again, hypothetically, you could be maxing out double contributions in a 457 retirement plan and maxing out a 403b for those final three years of work.&nbsp; If this sounds crazy, I&#8217;m right there with you.&nbsp; Still, there are teachers in states like California or New York making enough in their final few years of service to save such an enormous amount of money.&nbsp; Be sure to check your 457 plan to see if it offers both types of special catch-up contributions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Are 457 Contributions Pre-Tax or Roth?<\/h2>\n\n\n\n<p><\/p>\n\n\n\n<p>Many plans are now offering both pre-tax and Roth contributions.&nbsp; You can choose either or both ways to make your 457 contributions.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Pre-tax contributions are going to lower your federal tax liability in the current year you contribute.&nbsp; This means the money comes out of your paycheck pre-tax and that lowers your tax bill that year.&nbsp;<\/p>\n\n\n\n<p>What&#8217;s super interesting to me is the idea of Roth contributions.&nbsp; Yes, you pay taxes on the money right now.&nbsp; However, they grow tax-free and when you take them out, you don\u2019t owe any taxes on those withdraws.&nbsp; Basically, you pay the taxes upfront, then it can grow over a long period of time, and you never pay taxes on it again.<\/p>\n\n\n\n<p>Also, new as of 2020, if you&#8217;re still working past the age of 59 \u00bd,&nbsp; you are eligible to take withdrawals from your 457 retirement plan penalty free.&nbsp; That could be pre-tax or Roth &#8211; it doesn\u2019t matter.&nbsp;<\/p>\n\n\n\n<p>This is only a general overview of the 457b retirement plan.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Some plans have different rules.&nbsp; For example, things can work a little differently if you\u2019re an employee for a nonprofit organization.&nbsp; Also, there are ways to access 457 funds for unforeseen emergencies and in cases of divorce or death, but I didn&#8217;t want to go down those rabbit holes today.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Listen to Teacher Entrepreneurs Podcast<\/h3>\n\n\n\n<p><\/p>\n\n\n\n<iframe style=\"border: none\" src=\"\/\/html5-player.libsyn.com\/embed\/episode\/id\/16982861\/height\/90\/theme\/custom\/thumbnail\/no\/direction\/backward\/render-playlist\/no\/custom-color\/daa520\/\" height=\"90\" width=\"100%\" scrolling=\"no\" allowfullscreen=\"\" webkitallowfullscreen=\"\" mozallowfullscreen=\"\" oallowfullscreen=\"\" msallowfullscreen=\"\"><\/iframe>\n\n\n\n<p><\/p>\n\n\n\n<p>As always, I&#8217;m Rich and until next time.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p class=\"has-small-font-size\"><em>\u201cteachingmillionaires.com has partnered with <a href=\"https:\/\/teachingmillionaires.com\/recommends\/cardratings-blog-disclosure\/\" target=\"_blank\" rel=\"noreferrer noopener\">CardRatings<\/a> for our coverage of credit card products. <em>teachingmillionaires.com<\/em> and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses &amp; recommendations are the author\u2019s alone, and have not been reviewed, endorsed or approved by any of these entities. <em>Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser&#8217;s responsibility to ensure all posts and\/or questions are answered<\/em>. I am not a financial advisor. The information I share is for educational purposes only and shouldn\u2019t be considered as certified financial or legal advice. It is imperative you conduct your own research. I am sharing my opinion only.\u201d<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here&#8217;s a breakdown of the 457b retirement plan &#8211; and how it can help employees of state and local governmental agencies save and invest for retirement. What\u2019s a 457 Retirement Plan? If you haven&#8217;t heard of a 457b retirement plan, don&#8217;t let all the numbers and letters confuse you.&nbsp; It works basically like a 401k&#8230;<\/p>\n","protected":false},"author":3,"featured_media":4371,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"categories":[1,12],"tags":[],"class_list":["post-154","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-posts","category-retirement"],"featured_image_src_large":["https:\/\/teachingmillionaires.com\/newstag\/wp-content\/uploads\/2020\/10\/457-Retirement-Plan-Explained.jpg",800,450,false],"author_info":{"display_name":"Rich Smith","author_link":"https:\/\/teachingmillionaires.com\/newstag\/author\/rich\/"},"comment_info":29,"category_info":[{"term_id":1,"name":"All Posts","slug":"all-posts","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":33,"filter":"raw","cat_ID":1,"category_count":33,"category_description":"","cat_name":"All Posts","category_nicename":"all-posts","category_parent":0},{"term_id":12,"name":"Retirement","slug":"retirement","term_group":0,"term_taxonomy_id":12,"taxonomy":"category","description":"","parent":0,"count":4,"filter":"raw","cat_ID":12,"category_count":4,"category_description":"","cat_name":"Retirement","category_nicename":"retirement","category_parent":0}],"tag_info":false,"taxonomy_info":{"category":[{"value":1,"label":"All Posts"},{"value":12,"label":"Retirement"}]},"_links":{"self":[{"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/posts\/154","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/comments?post=154"}],"version-history":[{"count":0,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/posts\/154\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/media\/4371"}],"wp:attachment":[{"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/media?parent=154"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/categories?post=154"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/teachingmillionaires.com\/newstag\/wp-json\/wp\/v2\/tags?post=154"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}