You may be eligible to save for retirement
through a section 457 plan if you work for a state or local government or a
non-profit organization. Like 401(k) and 403(b) plans, 457 plans are named after the section of the tax code that
describes how they operate and who is eligible to participate.
A section 457 plan is a deferred
compensation plan with many similarities to 401(k)s
or 403(b)s. Like those retirement plans, you contribute
pretax income to a 457 plan and pay no tax on the
contributions or any earnings you realize until
you withdraw the money from your plan. You choose
the way your contributions are allocated among the investments available through your plan, and you have
to start making minimum withdrawals when you turn 70 1/2.
When you participate in a 457 plan, the portion
of your salary you contribute to the plan doesn’t actually
belong to you until you leave your job or retire. Technically,
the plan sponsor owns all of the 457 plan’s assets, and they’re
held in trust for you in an account set up in your name.
