As a physician or medical professional, it’s important to start planning for your retirement early on in your career. One retirement savings option that you may want to consider is a 457b plan, which is a type of retirement savings account that is available to employees of certain nonprofit organizations and government entities.

Here are some key things to know about 457b plans:

1. What is a 457b plan?

A 457b plan is a type of retirement savings account that allows employees of certain nonprofit organizations and government entities to save for retirement on a tax-deferred basis. Contributions to a 457b plan are made through payroll deductions, and the money in the account grows tax-deferred until it is withdrawn in retirement.

2. Who is eligible for a 457b plan?

457b plans are typically available to employees of state and local governments, as well as certain nonprofit organizations. If you work for one of these types of employers, you may be eligible to participate in a 457b plan.

3. How much can you contribute to a 457b plan?

The contribution limits for 457b plans are generally higher than those for other types of retirement savings accounts, such as 401(k) plans. In 2021, the contribution limit for a 457b plan is $19,500, and employees age 50 and older can make additional “catch-up” contributions of up to $6,500 per year.

4. What are the advantages of a 457b plan?

One of the key advantages of a 457b plan is that it allows you to save for retirement on a tax-deferred basis, meaning that you won’t have to pay taxes on the money in the account until you withdraw it in retirement. Additionally, 457b plans often offer investment options that are similar to those available in 401(k) plans, so you can choose investments that align with your retirement goals.

5. What are the drawbacks of a 457b plan?

One potential drawback of a 457b plan is that withdrawals from the account are subject to ordinary income tax, just like withdrawals from a traditional 401(k) plan. Additionally, if you leave your job before you reach retirement age, you may be subject to penalties for early withdrawal of the funds in your 457b plan.

In conclusion, a 457b plan can be a valuable retirement savings option for physicians and medical professionals who work for certain nonprofit organizations or government entities. By understanding the key features of a 457b plan and how it can help you save for retirement, you can make informed decisions about your financial future.

LEARN MORE ABOUT: Retirement Planning

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