457(b).

In plain English

A 457(b) is a deferred compensation plan offered mainly to state and local government workers and certain nonprofit staff. Like a 401(k) or 403(b), you contribute from your paycheck and the money grows tax-deferred, with a Roth option in many plans. Its standout feature is that a governmental 457(b) usually has no 10 percent early-withdrawal penalty once you leave the job, even before age 59 and a half. Some employees can contribute to both a 457(b) and a 403(b) in the same year, effectively doubling how much they can set aside.

01Why it matters

The penalty-free access after leaving a job makes a 457(b) valuable for anyone planning to retire early, and stacking it with a 403(b) can sharply increase tax-advantaged savings.

02The math, step by step

In 2026 a city employee can contribute up to the 457(b) elective deferral limit of $24,500. If she also has a 403(b) at the same employer, she may be able to contribute the full limit to each plan in the same year, because the governmental 457(b) limit is separate from the 403(b) limit. If she retires at 56 and needs income, she can tap the 457(b) without the 10 percent early-withdrawal penalty that a 401(k) would charge. The IRS sets this limit each year, so confirm the current figure first.

03What this is NOT

04Receipts

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