The 457 plan is a type of retirement plan that is commonly offered by state and local governments to their employees. Here are the basics of the 457 plan and how it works.

457 Plan Introduction

This type of retirement account is very similar to the 401k or 403b retirement account. Employees are allowed to deduct a certain amount of their paycheck and put it into this account. They are able to deduct the amount of their contributions from their taxable income. With this type of plan, employees can contribute as much as 100 percent of their income. However, they have to stick within the dollar contribution limits. With this type of plan, you can contribute as much as $16,500 per year just like you can with a 401k account. There is also an additional allowance for catch-up contributions if you are over the age of 50, which amounts to $5500. 

Non-Qualified

Where this plan differs from traditional retirement accounts is that it is not qualified. This means that it does not have to go by the same rules for transfers and rollovers that traditional retirement accounts do. This provides more flexibility for account holders and can be an attractive benefit.

 



Can you borrow from your 457 retirement plan?



If you have money in a 457 retirement plan, you could potentially borrow from it. Every 457 plan is different, but they do allow for loans. You would need to check with your plan administrator in order to see if loans are allowed with your particular plan. If they are allowed, then you will need to find out what the interest rate is when paying back the loan. You also need to see how long the maximum loan term is in order to determine if it is worth going through with a 457 loan or if you should look at other options.



What are the 457 retirement plan contribution limits?



If you have a 457 retirement plan, you have to abide by the annual contribution limits. As of 2010, you can contribute up to $16,500 per year for a normal contribution. If you are over the age of 50, you can also make a catch-up contribution of $5500. This brings the total amount of money that you can contribute up to $22,000. If you have under contributed to your plan in the past and are within three years of retiring, you can also contribute an additional $16,500 instead of the $5500, which brings the total to $33,000.

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