457(b) Plan

The 457(b) is the retirement plan you'll find at state and local government agencies — and some nonprofits. It works a lot like a 401(k) (pre-tax or Roth contributions, possible employer match, similar investment options), but it has one major advantage that makes early-retirement planners pay attention: no early withdrawal penalty.

With a 401(k), pulling money out before age 59.5 triggers a 10% penalty. A 457(b)? You can access your funds penalty-free as soon as you leave your job, regardless of age. A government worker who retires at 50 can start tapping their 457(b) right away — though income taxes still apply on pre-tax withdrawals.

The contribution limit is $23,500 for 2025, same as a 401(k). But here's the kicker: 457(b) limits are separate from 401(k)/403(b) limits. If you have access to both a 457(b) and a 403(b) — common for government employees — you can max out each one, effectively doubling your tax-advantaged savings to $47,000+ per year.

The 457(b) also has a unique catch-up provision. In the three years before your normal retirement age, you can contribute up to double the annual limit ($47,000 for 2025). This is separate from the standard age-50+ catch-up, though you can't use both at the same time.

One important distinction: governmental 457(b) assets can be rolled into IRAs or other plans. Non-governmental 457(b) plans — the ones offered by some nonprofits — cannot be rolled over, and the money technically remains the employer's property. That means it could be claimed by creditors if the organization goes bankrupt.