A 457 plan or 457(b) plan is an employer-sponsored, tax-favored retirement savings account. This type of plan is offered to state and local government employees, including police officers, firefighters, and other civil servants. Some high-paid (or “top hat”) executives at certain nonprofits like hospitals, charities, and unions also get access to 457(b) plans. You can think of the 457(b) plan like a 401(k) for the government-worker set.
These programs provide important tax preferences to help our civil servants save in addition to their primary retirement plan (state pension or police & fire pension). With the trend of public pensions reducing benefits and the probable likelihood that Social Security will reduce future benefits, it is becoming increasingly more important for employees to understand and utilize these programs. Watch the video below for a more detailed explanation from our senior advisor: