The magical 457b retirement account

If you are a software developer who works for the state you may have access to a second retirement account that you might not be aware of, the 457b.

I don't know what drugs they were smoking when they made all these stupid account names but a 457b is basically the same as a 401k or 403b with a twist.

Namely:

• Unlike a regular retirement account, there is no early withdrawal penalty when you quit (!!!). Funds are immediately accessible (but still taxed).
• It's maximum contribution limit is in addition to any 403b/401k you may already have (!!!)

What does this mean?

• Retiring early: It's a great "bridge the gap" account for leaving employment and then using it to drawdown funds until traditional retirement age.
• Double contribution: If you have a 403b and a 457b, like my wife, she can contribute a maximum of $38,000 of pre-tax income. It's $19,000 each, not in total.

Because of this, for my wife, we choose to load up her 457b moreso than her 403b because eventually we'd use it for early retirement (if we ever do that).

I first learned this from The Millionaire Educator and he has some great resources with plenty of details.

7 Reasons to Love Your 457 Plan

Saluton al ĉiuj miaj milionoj da legantoj! If you’ve heard any of my podcast interviews (#1, #2, #3), you know how much I love my 457 plans, even my fee-bloated variable annuity 457 plans. …

The Millionaire EducatorGerry Born

At the Pluralsight Author Summit this week, I met a fellow author who works for the State of Florida, and had no idea this might be available to him. The next day, he called and got his account opened up.

The same thing happened with my wife. Her school district orientation and benefits presentation only talk about her 403b account and don't even mention the significance of her 457b so what ends up happening is that a whole bunch of teachers have no idea they can contribute to both accounts.

So spread the word: check and see if you have access to the magical 457b!