As soon as a state or city government entity establishes the plan, staff members can contribute a part of their pre-tax earnings, to save for retirement. There’s no tax due on the cash until it’s withdrawn from the plan. This can be an excellent advantage, because once a person retires, they’re often in a lower tax bracket than they were when they were utilized.
There’s an annual limitation to how much a staff member can add to the plan, and this limitation increases once the employee is age 50. If their school uses both plans, teachers are permitted to make optimal yearly contributions to both a 457(b) plan and a 403(b) retirement plan.
Unlike a 401(k), a governmental 457(b) plan does not have an early withdrawal penalty if an employee retires or terminates work before age 59 1/2. There are also arrangements that allow early withdrawals in the case of “extreme monetary hardship” or an “unforeseen emergency”, like the serious health problem of the worker or a member of the family, impending foreclosure, or the need to pay funeral expenses.
As a basic rule, the most recent an employee can wait to begin taking withdrawals is age 70 1/2. This, in addition to other terms of the plan, might differ from company to employer, and each company is required to have a plan record that spells out all of the terms for the plan.