What Is a 403(b) Plan?
A 403(b) plan is a retirement account for certain employees of public schools and tax-exempt organizations. Participants include teachers, school administrators, professors, government employees, nurses, doctors, and librarians

The 403(b) plan is in many ways similar to it’s better-known cousin, the 401(k) plan. Each offers employees a tax-advantaged way to save for retirement, but investment choices are often more limited in a 403(b), and 401(k)s serve private-sector employees.

Both also offer Roth options and require participants to reach age 59½ to withdraw funds without incurring an early withdrawal penalty. Like a 401(k), the 403(b) plan offers $6,500 catch-up contributions for those age 50 and older in 2020 and 2021.1 Unlike a 401(k), it also offers a special plan for those with 15 or more years of service with the same employer

What Is a 401(k) Plan?
A 401(k) plan is a tax-advantaged, defined-contribution retirement account offered by many employers to their employees. It is named after a section of the U.S. Internal Revenue Code. Workers can make contributions to their 401(k) accounts through automatic payroll withholding, and their employers can match some or all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement. In a Roth 401(k) plan, withdrawals can be tax-free.

What Is a 457 Plan?
Generally speaking, 457 plans are non-qualified, tax-advantaged, deferred compensation retirement plans offered by state governments, local governments, and some nonprofit employers. Eligible participants are able to make salary deferral contributions, depositing pre-tax money that is allowed to compound without being taxed until it is withdrawn.

How a 457 Plan Works
Notably, 457 plans are similar in nature to 401(k) plans, only rather than being offered to employees at for-profit companies, they cater to state and local public workers, together with highly paid executives at certain nonprofit organizations, such as charities.

Participants of these defined contribution plans set aside a percentage of their salary for retirement. These funds are transferred to the retirement account, where they grow in value without being taxed. There are two types of 457 plans:

457(b): This is the most common 457 plan and is offered to state and local government employees.
457(f): A plan offered to highly compensated government and select non-government employees.
Employees are allowed to contribute up to 100% of their salary, provided it does not exceed the applicable dollar limit for the year. If the plan does not meet statutory requirements, the assets may be subject to different rules.

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DISCLAIMER: Although I am a Registered Investment Advisor, no statements made during this video should be taken as advice or recommendations since I do not know your specific situation, goals, or the suitability of said investments within your portfolio….(read more)

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