If you are the owner of a 457 plan, you have a unique opportunity in front of you. A 457 plan is one of the most flexible retirement savings programs currently available.

This calculator was designed to illustrate the potential value of a tax-deferred 457 plan. You can use it as a tool to try out different contribution strategies and see how much you can save up for your retirement. By adding the deposits you can make, it allows you to see if you are on the right track to achieving your financial freedom or if you should re-consider your saving strategy.

A 457 plan is similar to other tax-privileged savings accounts like 401k and 403b. They share many commonalities beyond their vague numerical titles, which refer to a specific section of tax code. At the core, these plans help participants save a portion of their earnings each year for retirement.

Any savings that are deposited into the plan grow along with some investments that are narrowed down by the plan administrator. Each year the account earns compound interest, and with traditional deposits the funds aren’t taxed until you are ready to take a payment.

The policies concerning the plan deposits and withdrawals are specifically tailored to the employees entitled to this program.

Typically, 457 plans are available to various state and municipal government workers. That includes firefighters, police officers, and some executives in unions and hospitals. Any employers that are exempt from paying federal income taxes can offer 457 plans to their employees. As such, various employees in the education system can have 457 plans too.

If a 457 is offered through your work, your employer can set up the account. When you opt-in to the program, you will sign a salary reduction agreement. Through this form, you can specify the amount of pre-tax income that your employer should transfer into your savings each year. Since your employer handles the plan deposits, you’ll get a summary of the withholdings on each of your paychecks.

As the plan holder, you can pick between individual stocks and mutual funds to get the growth and security you desire. Generally, 457 earnings compound annually. When you’re ready, you can take payments to supplement your income.

With larger deposits, you put more into your investment and lower your income taxes. However, there is a limit to how much can be put into the program each year. These limits are set by the IRS and adjusted regularly.

• As of 2018, plan participants can deposit up to $18,500 annually, but can’t ever exceed their yearly compensation.


• If you are 50 or older, you can increase your deposits by an additional $6,000 until you retire. This is known as a catch-up contribution, raising the yearly allowance to $24,500 a year for eligible workers.


• Three years before retirement, plan holders can double their contributions if they haven’t maxed out their savings in previous years. That means before retiring you could potentially amp up your deposits to $37,000.


• Unlike the other plans (401k and 403b), 457 programs don’t typically come with profit sharing, which are employer contributions to your account. 457 plan holders have some of the few remaining pensions, so this savings program is purely supplemental. When 457 savings are combined with a pension and social security, its possible to have a very comfortable retirement.

Some individuals have the option to enroll in a combination of savings programs. In some cases, you can contribute the maximum to both plans. Other times, the contribution maximum applies to the accounts combined. As an example, teachers usually have both 401k and 457 plans available to them.

Please see the limitations below:

• 401k and 403b plans have a combined maximum


• 457 plans have an individual maximum


• IRAs have an individual maximum

Example: Someone that has a 401k, 457 plan, and an IRA can contribute the full amount to each account. However, someone that has a 457 plan, 401k, and 403b is subject to some limitation. They could make an entire deposit to the 457 but would have to split the maximum contribution between a 401k and 403b.

Perhaps the most coveted attribute of a 457 plan is the penalty-free withdrawals. You can take money out of your savings at any given time - with the exception of Roth contributions. Roth contributions are deposited after paying taxes and must remain invested in the program for a minimum of 5 years before withdrawal.

Keep in mind: Your earnings are still considering ordinary income and would be taxed at the applicable rate. But consider yourself lucky as other retirement programs have a 10% early withdrawal penalty.

The calculator is very straightforward to use. It just requires some basic information regarding your 457 program. Let’s review the details together:

1. The first few questions relate to your 457 savings plan. On the first two lines of the calculator you can specify your contribution amount and your annual salary. You can use the arrow keys or your keyboard to make this input easier.


2. If you are expecting any yearly pay raises, you can add this to line three of the calculator. If unsure, it’s best to leave blank and return as your compensation changes.


3. On the next two lines, please identify your current age followed by the age you intend to retire.


4. If there is any money currently in your 457 account, you can add the current balance to line six.


5. Next, you can include the annual rate of return on your investments to the seventh line if the calculator.


6. The final questions pertain to employer matching. You can set the percent of your contribution that your employer will provide, up to a maximum percentage of your salary.

Once the questionnaire is completed, you can view your results. There is a smart summary of the details you provided in the result window where you can see the total of your contributions, along with your employers (if applicable).

This smart prompt illustrates the value of your account based on the age you plan to retire. You should consider this figure against your needs in retirement and any other savings you have. Meanwhile, more thorough information can be found in the integrated reports.

The first report is a graph demonstrating the growth of your savings up to your retirement. The second report provides a yearly summary of your deposits into the account and your earnings. With this information, you can tailor your savings plan to meet your retirement goals. If you aren’t contributing the maximum, you could amp up your deposits to gain more security.

Remember to bookmark this page and save it to the home screen of your smartphone. You can return as the IRS increases contribution limits to get an accurate depiction of your savings potential. If you found this page useful, you can promote us on social media by using the share feature.