457(b) Plan Explained: 2026 Contribution Limits, Rules, Benefits & Withdrawals

If you work for a state or local government, public agency, or certain tax-exempt organizations, you may have access to a retirement account that doesn’t get as much attention as a 401(k) or IRA.

It’s called a 457(b) plan.

For eligible employees, a 457(b) can be a valuable way to save for retirement while potentially reducing taxable income today. It also has some features that make it different from a traditional 401(k), particularly when it comes to withdrawals after leaving a job.

But there are plenty of questions surrounding these plans.

How much can you contribute? Is a 457(b) better than a 401(k)? Can you have both? What happens when you retire? Can you withdraw money before age 59½? And what happens if you change jobs?

This guide breaks down the 457(b) plan in plain English, including the 2026 contribution limits, catch-up rules, tax advantages, withdrawal rules, rollover options, and the differences between a 457(b), 401(k), and 403(b).

Important: This article provides general U.S. retirement information and isn’t individualized financial, tax, or legal advice. Plan rules can vary, so check your plan documents and current IRS guidance before making a retirement decision.

What Is a 457(b) Plan?

A 457(b) plan is a tax-advantaged deferred compensation retirement plan available to certain employees of state and local governments and qualifying tax-exempt organizations.

The IRS describes 457(b) plans as eligible deferred compensation plans that allow participants to defer income taxation on retirement savings into future years. (IRS)

A 457(b) may be offered by organizations such as:

• State governments
• Local governments
• Public agencies
• Certain municipalities
• Certain tax-exempt organizations
• Other eligible employers that meet the requirements of Section 457

This means a 457(b) isn’t generally available to everyone.

If you work in the public sector, however, it’s worth checking whether your employer offers one.

How Does a 457(b) Plan Work?

The basic idea is fairly straightforward.

You choose how much of your paycheck you want to contribute to the plan, subject to the applicable annual limits.

The money is invested according to the options offered by your plan.

Depending on the type of contribution, taxes are generally deferred until money is distributed from the plan.

For example, suppose you earn $80,000 a year and contribute $10,000 to a traditional 457(b).

Instead of paying current federal income tax on that $10,000 as part of your current taxable wages, the contribution is generally deferred for tax purposes.

The money can then remain invested for retirement.

Later, when you take taxable distributions, the withdrawn amount is generally included in your taxable income.

The exact tax treatment depends on the type of 457(b), contribution, and distribution.

Who Is Eligible for a 457(b) Plan?

A 457(b) isn’t an account that anyone can simply open at a brokerage.

The employer has to be eligible.

Generally, 457(b) plans can be established by:

• State or local governments
• Certain tax-exempt organizations under Section 501(c)

(IRS)

That means eligibility is primarily determined by your employer and the plan they provide.

If you’re unsure, ask your human resources department or benefits administrator whether your workplace offers a governmental or non-governmental 457(b).

457(b) Contribution Limit for 2026

One of the biggest questions employees have is:

How much can I contribute to a 457(b) in 2026?

The basic elective deferral limit for 2026 is:

$24,500

The IRS increased the limit from $23,500 in 2025 to $24,500 for 2026. (IRS)

That means an eligible participant can generally defer up to $24,500 of compensation into a 457(b) during 2026, subject to the plan’s terms and applicable rules.

2026 457(b) contribution limits at a glance

The enhanced catch-up for people who are 60, 61, 62, or 63 can be up to $11,250 in 2026 instead of the standard $8,000 catch-up, if the plan permits it. (IRS)

These limits are important because they can make a 457(b) especially useful for employees who are trying to increase retirement savings later in their careers.

What Is the 457(b) Catch-Up Contribution?

If you’re at least 50 years old by the end of the calendar year, you may be eligible to make additional catch-up contributions to a governmental 457(b), if the plan allows them.

For 2026, the standard catch-up limit is:

$8,000

That means a qualifying participant could potentially contribute:

$24,500 + $8,000 = $32,500

in 2026.

The IRS also provides a higher catch-up limit for participants who attain ages 60 through 63 during the year. For 2026, that higher amount is $11,250. (IRS)

So someone in that age range could potentially contribute:

$24,500 + $11,250 = $35,750

assuming the plan permits the applicable catch-up contribution.

Why catch-up contributions matter

Someone who starts saving seriously for retirement later in life may have fewer years for investment growth.

Higher contribution limits can provide an opportunity to put more money away during the final working years.

However, don’t contribute more simply because the limit is available. Your emergency savings, debt, pension benefits, other retirement accounts, and overall financial situation should also be considered.

Special 457(b) Catch-Up Rules

There is another feature that makes some 457(b) plans particularly interesting.

Certain plans may allow a special catch-up provision during the three years before the participant reaches normal retirement age under the plan.

The rules are complicated, and the amount isn’t simply added on top of every other catch-up contribution.

The plan’s definition of normal retirement age and your previous contributions can affect how much you’re actually allowed to contribute.

Because of that, employees approaching retirement should ask their plan administrator whether they qualify for the special 457(b) catch-up.

Governmental vs. Non-Governmental 457(b) Plans

Not all 457(b) plans work exactly the same way.

There are two broad categories:

Governmental 457(b)

These are generally offered by state and local government employers.

They have rules that can differ from those governing non-governmental plans.

For many employees, this is the type of 457(b) they’ll encounter.

Non-governmental 457(b)

These may be offered by certain tax-exempt organizations.

Non-governmental 457(b) plans have different rules and can involve additional considerations concerning plan assets, distributions, and employer creditors.

This distinction matters.

If you have a non-governmental 457(b), don’t automatically assume that every rule you read about a governmental 457(b) applies to your account.

What Are the Tax Benefits of a 457(b)?

One of the main reasons employees use a 457(b) is the potential tax advantage.

With traditional contributions, you generally defer taxation on the money until you receive a distribution.

Imagine that you earn $100,000 and contribute $15,000 to a traditional 457(b).

The $15,000 contribution generally isn’t included in your current federal taxable income in the same way as wages that you receive directly.

Instead, taxation is generally deferred until you take the money out.

This can be useful if you expect your tax rate to be lower in retirement.

However, tax deferral isn’t the same thing as tax elimination.

Eventually, taxable distributions can increase your taxable income.

Does a 457(b) Reduce Taxable Income?

Traditional 457(b) contributions generally reduce the amount of current income subject to federal income tax, subject to applicable rules.

That’s one reason employees often increase their contributions when they move into higher tax brackets.

For example, suppose your salary is $90,000 and you contribute $20,000 to a traditional 457(b).

Your actual tax calculation is more complicated than simply subtracting $20,000 from your salary, but the contribution generally provides a tax-deferral benefit.

A Roth 457(b), if offered by the plan, works differently because contributions are made with after-tax dollars.

Does a 457(b) Have a Roth Option?

Some governmental 457(b) plans can offer a designated Roth account.

With Roth contributions:

• Contributions are made with after-tax money.
• You generally don’t receive the same upfront tax deduction as with traditional contributions.
• Qualified distributions can potentially be tax-free.

Whether your employer offers a Roth 457(b) depends on the plan.

So if you’re comparing traditional and Roth contributions, look at your current tax situation and your expectations for retirement rather than assuming one option is always better.

457(b) Withdrawal Rules

This is one of the areas where the 457(b) can stand out.

For a governmental 457(b), distributions generally aren’t subject to the additional 10% early-distribution tax that applies to many other retirement accounts.

The IRS specifically states that distributions from a governmental 457(b) generally aren’t subject to the 10% additional tax, except to the extent the distribution is attributable to certain amounts rolled into the 457(b) from another type of retirement plan or IRA. (IRS)

This does not mean withdrawals are tax-free.

That’s an important distinction.

A taxable withdrawal can still be subject to ordinary income tax.

Example

Suppose you’re 52 and leave your government job.

You have $100,000 in a governmental 457(b).

If you take a taxable distribution before age 59½, you generally won’t owe the additional 10% early-distribution tax simply because you’re under 59½.

However, the taxable distribution can still be included in your income and subject to regular income tax.

That feature can make a governmental 457(b) attractive for someone who plans to retire before age 59½.

Is There an Early Withdrawal Penalty on a 457(b)?

For a governmental 457(b), generally no 10% additional early-distribution tax applies simply because you’re under age 59½.

But there are important exceptions.

For example, amounts that were rolled into the 457(b) from another type of eligible retirement plan or IRA can be treated differently.

The IRS specifically warns that distributions attributable to those rollover amounts can be subject to the additional 10% tax. (IRS)

So don’t treat the 457(b) early-withdrawal rule as a blanket “withdraw anytime without penalties” rule.

The source of the money matters.

What Happens to a 457(b) When You Leave Your Job?

Leaving your employer doesn’t necessarily mean you have to immediately empty your 457(b).

Depending on the plan and your circumstances, you may have options that can include:

• Leaving the money in the plan
• Taking a distribution
• Rolling eligible money into another retirement account
• Moving the funds to another eligible employer plan

The available choices depend on the plan and applicable tax rules.

Before moving the money, compare fees, investment options, creditor protections, withdrawal rules, and tax consequences.

Can You Roll Over a 457(b) to an IRA?

Eligible distributions from a governmental 457(b) may generally be rolled over to an IRA or another eligible retirement plan that accepts rollovers.

The IRS notes that eligible rollover destinations can include traditional IRAs, 401(k) plans, 403(b) plans, and governmental 457(b) plans, depending on the circumstances and receiving plan’s rules. (IRS)

A direct rollover is generally worth considering when you want to avoid having the money paid to you first.

If an eligible rollover distribution is paid directly to you instead, mandatory federal withholding can apply. The IRS generally requires 20% withholding on eligible rollover distributions from retirement plans when the distribution is paid to the participant rather than directly rolled over. (IRS)

457(b) vs. 401(k): What’s the Difference?

A 457(b) and 401(k) are both retirement savings vehicles, but they aren’t identical.

The biggest difference isn’t necessarily the contribution limit.

For many participants, the distribution rules are more important.

A governmental 457(b) can provide more flexibility for certain people who leave employment before age 59½ because the normal 10% additional early-distribution tax generally doesn’t apply to qualifying 457(b) amounts. (IRS)

Can You Have a 457(b) and a 401(k) at the Same Time?

In many situations, yes.

This is one of the potentially powerful features of a 457(b).

The contribution limits for a 457(b) can be separate from the elective deferral limits that apply to a 401(k) or 403(b), meaning an employee eligible for both plans may be able to contribute to both, subject to the applicable rules and plan terms.

For example, someone with access to both a 457(b) and 401(k) could potentially defer:

• $24,500 into the 457(b)
• $24,500 into the 401(k)

for a combined $49,000 of employee elective deferrals in 2026, before considering applicable catch-up contributions.

However, don’t interpret that as a universal permission to contribute any amount you want to both accounts.

Your employer plans and individual circumstances matter.

Check the plan documents and IRS rules before attempting to maximize contributions across multiple plans.

457(b) vs. 403(b)

A 403(b) is commonly associated with public schools, certain nonprofits, and other eligible organizations.

A 457(b), by contrast, is generally associated with state and local governments and certain tax-exempt organizations.

The contribution limits for 2026 are similar in important respects, but the plans have different rules.

If you have access to both, the decision isn’t necessarily about choosing one forever.

Some employees may benefit from using both, depending on their employer’s plans and their overall retirement strategy.

Advantages of a 457(b) Plan

A 457(b) can offer several advantages.

1. Higher retirement savings potential

The $24,500 basic 2026 contribution limit provides substantial room for retirement savings.

2. Tax deferral

Traditional contributions can provide a current tax-deferral benefit.

3. Potential early-retirement flexibility

Governmental 457(b) plans generally don’t impose the standard 10% additional tax on distributions simply because you’re under age 59½.

4. Catch-up opportunities

Older workers may be able to contribute additional amounts.

5. Possible Roth option

Some plans offer Roth 457(b) contributions.

6. Potential to combine with another workplace plan

In certain circumstances, employees can contribute to both a 457(b) and another employer retirement plan.

Potential Disadvantages of a 457(b)

No retirement account is perfect.

Potential drawbacks include:

Limited availability

You generally can’t open a 457(b) on your own. Your employer must offer an eligible plan.

Plan investment choices vary

Your employer determines which investments are available.

Fees can differ

Two plans can have very different administrative and investment costs.

Withdrawals can create taxable income

Traditional 457(b) distributions are generally taxable.

Non-governmental plans require extra attention

The rules for non-governmental 457(b) plans can differ significantly from governmental plans.

Is a 457(b) Plan Safe?

The word “safe” can mean different things.

A 457(b) isn’t automatically a guaranteed investment.

The money in the account can rise or fall depending on the investments you choose.

A governmental 457(b) is a retirement plan with specific legal protections and rules, but investment risk still exists.

Your plan may offer:

• Stock funds
• Bond funds
• Target-date funds
• Stable-value options
• Money market options
• Other investment choices

The investment risk comes from the underlying investments, not simply from the fact that the account is called a 457(b).

What Happens to a 457(b) When You Retire?

When you retire, you generally have several possible choices depending on your plan.

You may be able to:

• Keep the money in the plan
• Begin taking distributions
• Roll eligible funds into another retirement account
• Create a withdrawal strategy based on your income needs

There isn’t one universally correct choice.

For example, someone retiring at 55 might value the withdrawal flexibility of a governmental 457(b), while someone else might prioritize consolidating several retirement accounts.

The decision should consider taxes, investment costs, income needs, Medicare or other benefits, and your broader retirement plan.

Are 457(b) Withdrawals Taxable?

Traditional 457(b) withdrawals are generally taxable as ordinary income when distributed, unless an applicable exception or tax rule changes the treatment.

That’s why withdrawing a large amount in one year can potentially push you into a higher income-tax bracket.

Instead of taking a $100,000 lump-sum withdrawal, some retirees may choose a carefully planned distribution schedule.

The right strategy depends on the individual’s tax situation.

Required Minimum Distributions and 457(b) Plans

Required minimum distribution rules can apply to 457(b) plans.

The IRS lists 457(b) plans among retirement arrangements subject to RMD rules. (IRS)

The exact starting age and requirements depend on current law and individual circumstances.

Because RMD rules have changed in recent years, don’t rely on an old retirement article when determining when you need to start withdrawals.

457(b) Plan Example

Let’s consider a simplified example.

Suppose Sarah works for a local government and earns $85,000 a year.

Her employer offers a governmental 457(b).

Sarah decides to contribute $15,000 during 2026.

If her plan permits it, she could potentially increase her contribution toward the $24,500 annual limit.

Now imagine Sarah is 55 and qualifies for the $8,000 age-based catch-up.

Her potential employee contribution limit could be:

$24,500 + $8,000 = $32,500

That’s a substantial amount of retirement savings in one year.

If Sarah later leaves her job at age 56, the governmental 457(b)’s special early-distribution rules may give her more flexibility than she would have with some other retirement accounts.

Of course, taking money out early can still create income-tax consequences and reduce the amount available for later retirement.

Who Should Consider a 457(b)?

A 457(b) can be particularly interesting for:

• State employees
• Local government employees
• Municipal employees
• Public-sector workers
• Certain nonprofit employees
• Employees planning early retirement
• Workers who have already maximized other retirement savings
• Employees who want additional tax-deferred retirement savings

But having access to a 457(b) doesn’t automatically mean you should max it out.

Your overall retirement strategy matters more than any individual account.

457(b) Plan Frequently Asked Questions

What is a 457(b) plan?

A 457(b) is a tax-advantaged deferred compensation retirement plan generally available to employees of state and local governments and certain tax-exempt organizations.

What is the 457(b) contribution limit for 2026?

The basic 2026 elective deferral limit is $24,500. (IRS)

How much can someone over 50 contribute to a 457(b) in 2026?

A qualifying participant age 50 or older may generally be able to make an additional $8,000 catch-up contribution, if the plan permits it, bringing the potential total to $32,500. (IRS)

What is the 457(b) catch-up limit for ages 60–63?

For 2026, the enhanced catch-up limit for participants ages 60 through 63 can be $11,250, if the plan permits it. (IRS)

Is a 457(b) better than a 401(k)?

Not automatically. A 457(b) has some unique advantages, particularly its distribution rules, but the better option depends on fees, investment choices, employer contributions, tax considerations, and your retirement goals.

Can I have a 457(b) and a 401(k)?

In many cases, yes. The contribution limits for a 457(b) can be separate from the elective deferral limits for a 401(k), potentially allowing eligible participants to save through both plans.

Can I withdraw money from a 457(b) before age 59½?

Governmental 457(b) distributions generally aren’t subject to the 10% additional early-distribution tax simply because the participant is under 59½. However, regular income tax may still apply, and special rules can apply to rollover amounts. (IRS)

What happens to my 457(b) when I retire?

Depending on your plan, you may be able to leave the money in the plan, take distributions, or roll eligible funds into another retirement account.

Can a 457(b) be rolled into an IRA?

Eligible distributions from a governmental 457(b) can generally be rolled into an IRA or another eligible retirement plan that accepts rollovers, subject to the applicable rules. (IRS)

Are 457(b) withdrawals taxable?

Traditional 457(b) distributions are generally included in taxable income when distributed, although the exact treatment depends on the type of account and distribution.

Does a 457(b) have an early withdrawal penalty?

Governmental 457(b) plans generally aren’t subject to the 10% additional tax on early distributions, with important exceptions, including certain amounts attributable to rollovers from other retirement accounts. (IRS)

Is a governmental 457(b) different from a non-governmental 457(b)?

Yes. Governmental and non-governmental 457(b) plans have important differences, so participants should check which type of plan they have before making decisions.

Is a 457(b) a good retirement plan?

It can be an excellent retirement savings tool for eligible employees, particularly those who value tax deferral, high contribution limits, and the potential flexibility of governmental 457(b) distributions.

Final Thoughts

A 457(b) plan can be one of the most useful retirement savings options available to eligible government and nonprofit employees.

The 2026 basic contribution limit of $24,500 gives participants substantial room to save, while catch-up provisions can allow eligible older workers to contribute even more. (IRS)

The plan also has a feature that deserves special attention: governmental 457(b) distributions generally aren’t subject to the standard 10% additional early-distribution tax simply because you’re under age 59½. (IRS)

But that doesn’t make every 457(b) automatically better than a 401(k), 403(b), or IRA.

The right retirement strategy depends on your income, age, employer benefits, investment choices, fees, tax situation, pension, and when you expect to retire.

If your employer offers a 457(b), don’t ignore it simply because you’ve heard more about 401(k)s.

Take a close look at the plan.

The combination of high contribution limits, tax advantages, catch-up opportunities, and potentially flexible withdrawal rules can make a 457(b) an important part of a well-designed retirement strategy.

Before making a major contribution, withdrawal, or rollover decision, review your plan documents and verify the current rules with the IRS, your plan administrator, or a qualified tax or financial professional.