457 Plans

If you work for a state or local government, or a non-profit organization, you may be eligible to enroll in a 457 plan. Similar to traditional 401(k) and 403(b) plans, you contribute pre-tax income to a 457 up to the same contribution limits that apply to a 401(k) or 403(b). And, your earnings grow tax-deferred until you begin making withdrawals, which you must do the year following the year you turn 70 1/2.

However, with a 457 plan, the assets you contribute to your account aren't yours until you leave your job or retire. Until that point, the plan sponsor owns the plan's assets, though you still decide the products in which to invest from the selection your plan provides. The assets are held in a trust set up in your name.

The Three-Year Catch-Up Provision

Contribution limits are the same for 457 plans as they are for 401(k)s and 403(b)s, with the exception of catch-up opportunities. If you're 50 and older, you may take advantage of a three-year catch-up provision that's uniquely available to those invested in 457 plans.

If you're within three years of the earliest retirement age set by your employer, you may contribute twice the normal limit if you haven't put in the maximum in the past two years. However, if you're taking advantage of the three-year catch-up limit, you may not also contribute the catch-up generally offered to those 50 and older.
