457(b) Plan
Financial term in the Retirement category
Definition
A deferred compensation retirement plan available to state and local government employees and some nonprofit workers. Unlike 401(k) and 403(b) plans, early withdrawals before age 59 1/2 are not subject to the 10% penalty.
Related Terms
403(b) Plan
A tax-advantaged retirement plan for employees of public schools, nonprofits, and certain religious organizations. Similar to a 401(k) but with different employer eligibility rules. Contributions are made pre-tax and grow tax-deferred until withdrawal.
401(k)
A tax-advantaged retirement savings plan offered by employers that allows employees to contribute a portion of their salary before taxes. Many employers offer matching contributions up to a certain percentage.
Defined Contribution Plan
A retirement plan where employees and/or employers contribute to individual accounts, and the retirement benefit depends on contributions and investment performance. Examples include 401(k), 403(b), and 457(b) plans. The employee bears the investment risk.
Frequently Asked Questions
What is 457(b) Plan?
A deferred compensation retirement plan available to state and local government employees and some nonprofit workers. Unlike 401(k) and 403(b) plans, early withdrawals before age 59 1/2 are not subject to the 10% penalty.
Why is 457(b) Plan important in personal finance?
457(b) Plan is an important retirement concept that helps individuals make better financial decisions. Understanding 457(b) Plan can improve your financial planning and help you achieve your money goals.
How does 457(b) Plan relate to 403(b) Plan?
457(b) Plan and 403(b) Plan are related financial concepts. A tax-advantaged retirement plan for employees of public schools, nonprofits, and certain religious organizations. Similar to a 401(k) but with different employer eligibility rules. Contributions are made pre-tax and grow tax-deferred until withdrawal.
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