457(b) Retirement Savings Calculator
What is a 457(b) Plan?
A 457(b) plan is a tax-advantaged deferred compensation retirement plan available to state and local public employees, as well as some non-profit executives. It functions similarly to a 401(k) or 403(b), but it possesses unique features that make it highly valuable for public sector workers, such as police officers, firefighters, and teachers.
How This 457 Calculator Works
This calculator uses the power of compound interest to project your account growth. It takes your current age, your retirement age, your annual contributions, and your current balance to determine how much you will have saved by the time you stop working. We assume contributions are spread evenly throughout the year and compounded monthly.
The Power of Tax-Deferred Growth
Because the 457(b) is a "deferred compensation" plan, the money you contribute is taken out of your paycheck before taxes are calculated. This lowers your current taxable income. Furthermore, the investments grow tax-deferred, meaning you don't pay taxes on dividends or capital gains until you withdraw the funds in retirement.
Example Calculation
Imagine a 35-year-old public employee with a starting balance of $20,000. If they contribute $1,000 per month ($12,000 annually) and expect an average annual return of 7%, by the time they retire at age 65, their account could grow to approximately $1,327,000. Of that total, only $380,000 would be their actual contributions—the rest is growth.
Key Benefits of 457(b) Plans
- No Early Withdrawal Penalty: Unlike 401(k) plans, if you leave your employer (severance from service), you can access your 457(b) funds without the standard 10% IRS penalty, regardless of your age.
- Double Contribution Limits: In some cases, if you have access to both a 403(b) and a 457(b), you can contribute the maximum amount to BOTH plans simultaneously.
- Catch-Up Provisions: 457 plans offer unique "3-year catch-up" provisions that allow you to contribute significantly more as you approach your normal retirement age.
457(b) Contribution Limits for 2024
For 2024, the basic elective deferral limit is $23,000. If you are age 50 or older, you can contribute an additional $7,500 catch-up contribution, bringing the total to $30,500.