Are you looking to retire soon? If so, you’ll need to start planning. One crucial factor to consider is your 457 savings. How much money will you have available each month in retirement? Use our free 457 calculators to estimate your savings and income in retirement. This tool is easy to use and can help you make informed decisions about your future.
457 Savings Calculator
Use our 457 savings calculator to estimate your retirement savings. Input your annual contribution limits, maximum employer matching contributions, and assumed annual rate of return.
457 Withdrawal Calculator
As retirement age approaches, many people start to worry about how they will withdraw from their retirement savings plan. One option that can provide peace of mind is an annuity with a guaranteed lifetime withdrawal benefit (GLWB).
An annuity is an insurance policy that guarantees to distribute a paycheck to you for the rest of your life, even after the 457-employee savings plan runs out of money. This can provide much-needed security in retirement, knowing that you will have a regular income stream no matter what happens with your other retirement savings. In addition, an annuity can help to automate the retirement withdrawal process for 457 savings plans, making it one less thing you have to worry about.
So, if you are approaching retirement age and are wondering how to best withdraw from your retirement savings, an annuity with a GLWB may be worth considering.
Note: You can purchase an annuity (with no tax penalties) with your 457(b) deferred compensation plan, 401(k), IRAs, retirement accounts, investments, and cash.
457(b) Withdrawal Comparison
Historically financial advisors recommend withdrawing 4% from your 457(b) plan and adjusting for inflation. However, the 4% rule has been debunked as a safe withdrawal rate. New research concludes as low as 2.8% is the new rule. The following table compares rolling your 457 into a new annuity with withdrawing income yourself or utilizing an advisor.
| Features | Annuity | 457(b) | IRA | Roth IRA |
|---|---|---|---|---|
| Withdrawal Percentage | 5.20% – 6.55% | 4% | 4% | 4% |
| Can Income Increase? | Yes | Yes | Yes | Yes |
| Can Income Decrease? | No | Yes | Yes | Yes |
| How Long Will Money Last? | Lifetime | 30 Years+ | 30 Years+ | 30 Years+ |
| Annual Fees | 0 – 1.50% | 1% – 4% | 1% – 4% | 1% – 4% |
| Taxation | Taxable/Tax-Free | Taxable | Taxable | Tax-Free |
| Death Benefit | Account Balance | Account Balance | Account Balance | Account Balance |
Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:
What Is A 457 Plan?
A 457 retirement plan is a tax-advantaged retirement saving offered by public employers, such as state and local governments and specific non-profit organizations. It is similar to a 401(k) plan, which is offered by private employers, in that it allows employees to contribute a portion of their salary on a tax-deferred basis, meaning that they do not pay taxes on their contributions or any earnings from those contributions until they withdraw the money from the plan.
How Does A 457 Retirement Plan Work?
A 457 plan is a type of deferred compensation retirement plan that an employer sponsors. It is designed to allow employees to save for retirement on a tax-deferred basis, which means that contributions to the plan are made on a pre-tax basis and are not subject to federal income tax until they are withdrawn.
Like other retirement plans, a 457 plan is intended to help you save for retirement by allowing you to set aside money regularly and invest it in various investment options, such as stocks, bonds, and mutual funds. The plan may also offer other features, such as loans and hardship withdrawals, which can be used to access your money before retirement in certain circumstances.
Here’s how a 457 plan typically works:
- Enrollment: Employees eligible to participate in a 457 plan can enroll by completing the necessary paperwork and electing to contribute a certain amount of their income to the plan.
- Contributions: Employees can contribute a percentage of their income or a fixed dollar amount to the plan regularly, such as every pay period. Contributions are made on a pre-tax basis, which means they are not subject to federal income tax when they are contributed.
- Investment options: Employees can choose how they want their contributions to be invested, usually from a selection of mutual funds or other investment options offered by the plan.
- Withdrawals: Employees can generally begin withdrawing from their 457 plan once they reach a certain age (typically age 70 1/2) or if they leave their job. Withdrawals are subject to federal income tax at the time they are taken.
It’s important to note that 457 plans are subject to specific rules and restrictions, such as limits on the number of contributions that can be made each year and restrictions on when and how funds can be withdrawn. Therefore, it’s a good idea to carefully review the terms of a 457 plan before enrolling and to consult with a financial professional if you have any questions.
What Is The Difference Between A 457 Plan And A 401(k)?
One of the main differences between a 457 plan and a 401(k) plan is that the contributions to a 457 plan are made with pre-tax dollars, while contributions to a 401(k) plan can be made with either pre-tax or after-tax (also known as “Roth”) dollars. This means that contributions to a 457 plan can reduce your taxable income in the year you make them, potentially lowering the amount of taxes you owe.
Next Steps
Retirement planning doesn’t have to be one size fits all. Depending on your unique circumstances and goals, several ways to save for retirement can give you the peace of mind you deserve. Our 457-employee savings plan calculator is an excellent tool for estimating how much you need to save. And for those looking for guaranteed income in retirement, an annuity with a GLWB rider may be the right solution. Contact us today for a quote.
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Frequently Asked Questions
How much should I put into a 457 plan?
The amount a participant can contribute to their 457(b) plan annually cannot exceed either: 100% of the participant’s compensation that is taxable or the elective deferral limit ($22,500 in 2023 and $20,500 in 2022).
What happens if I contribute too much to my 457 plan?
If you defer too much compensation into an eligible deferred compensation plan, you may jeopardize the plan’s status under IRC Section 457(b) unless you act quickly to correct the issue.
When can I withdraw from my 457 without penalty?
With a 457 account, you can withdraw without being penalized at any age. However, if you try to withdraw money from other retirement savings plans before reaching the minimum age (55 or 59½, depending on the plan), you will be charged a 10% penalty.
Can I withdraw from my 457(b) to buy a house?
You cannot withdraw money from a 457 plan at any point for any reason until you leave employment.
How much tax will be taken out of my 457 withdrawal?
Suppose you take an eligible rollover distribution from your governmental 457(b) plan. In that case, the government will withhold 20% of the distribution for income taxes unless you directly roll it over into another governmental 457(b) plan, IRA, 403(b) plan, or qualified plan. This is because withdrawals from 457 retirement plans are taxed as ordinary income; however, distributions from a ROTH 457 Plan are not subject to taxation.
Is Roth IRA better than 457?
Your Roth IRA will be most beneficial if tax rates go up when you retire, as your withdrawals would then be tax-free. However, if taxes lessen when you retire, your 457 accounts will work more in your favor from a financial perspective. In other words, having both types of accounts can help stabilize things.