What is the difference between a 401(k) and a 457 retirement plan?

Learn the differences and similarities between a 401 (k) and 457 retirement savings plan. 457 plans are commonly offered to government workers, while private-sector companies offer 401 (k)s. 457 plans offer generous catch-up contributions for workers who are approaching retirement age. Both retirement accounts offer the same tax advantages.

Can a 401(k) and a 457(b) plan be combined?

If your plan permits both the special 457 (b) catch-up and the age-50 catch-up, you may use the larger allowed deferral, but not both. The IRS allows you to save to both a 401 (k) and 457 (b) plan at the same time, because a 457 (b) plan is a nonqualified plan.

What is a 457(b) 401(k) plan?

Congress created the 457 (b) plan in 1982 to allow employees of state and local governments, as well as tax-exempt organizations, to set aside money for retirement on a pre-tax basis. Since then, employees of for-profit companies have been able to participate if their employer allows it. Deciding between a 457 (b) and a 401 (k) Plan? Click here.