401(ok)vs. 457(b) Plans: Comparability

  • 401(ok) and 457(b) plans are equally structured tax-advantaged retirement financial savings plans.
  • 401(ok) plans are sponsored by personal employers, whereas 457(b) plans are provided by governments and a few nonprofit organizations.
  • Contribution limits and withdrawal guidelines are additionally key variations between the 2 account varieties.
  • Learn extra Private Finance Insider tales.

401(ok) and 457(b) are two kinds of plans you will have come throughout when taking a look at your retirement choices. As tax-deferred retirement accounts, 401(ok) and 457(b) plans share many similarities. However there are additionally some key variations, together with who can take part and when you possibly can take cash from them with out penalties.

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401(ok) vs. 457(b): At a look

Contributions to a 401(ok) and 457(b) are made in pre-tax {dollars}, and earnings develop tax-free till they’re taken as distributions at retirement. One of many important variations between them is who has entry to every kind. Non-public Employer Sponsor 401(ok) plans for his or her staff, whereas state and native governments supply 457(b) plans to public staff. Sure nonprofit organizations can also supply 457(b) plans.

For his or her half, 401(ok) plans are established for workers as the principle supply of earnings for retirement. Alternatively, 457(b) plans are usually used as a complement to authorities staff’ pension plans. Contributors in a 457(b) plan additionally aren’t topic to the identical tax penalty for withdrawing cash earlier than age 59½, though they do have decrease complete contribution limits.

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