457(b) Retirement Plan Guide
Tax-advantaged retirement plan for government entities
457(b) Testimonial
Did not hesitate to give Langan Financial a 5-star review.
First met Bob when he took over management of my employers deferred comp program which was previously managed by a very large, national financial company who in the previous 10+ years I participated, never saw or spoke to a representative.
Couple things immediately caught my attention, Langan Financial management fees were significantly less thus allowing my account to grow more, they offered to schedule a review with each participant, they came in and did group lunch & learn sessions 2 times a year that were NOT sales pitches but truly basic information on investing and the advantages of having a financial plan.
They offered 1 on 1 meetings with every employee, whether a deferred comp participant or not to review their finances and make suggestions, no sales pitches.
I am so glad I listened to Bob & his team since they played a major role in allowing me to now enjoy a financially stress free retirement. I continue to meet with Langan Financial on a regular basis to review my investments and have never felt pressured or listened to a sales pitch.
The entire team is a pleasure to work with and I highly recommend Langan Financial for financial planning & guidance.
What is a 457(b) Retirement Plan?
A 457(b) Retirement Plan is a form of deferred compensation plan offered by state and local government employers under section 457(b) of the Internal Revenue Code.
The plan structure is similar to that of a 401(k) plan, but there are unique differences that benefit the employee.
By taking advantage of a 457(b) retirement plan, pre-tax money can grow untaxed until the participant is ready to retire. At this point, it will then be used as retirement income.
457(b) Max Contributions
For 457(b) contributions, employees can divert part of their salary, either pre or post-tax, into a retirement account.
Employee contributions to the plan come from a percentage of their paycheck up to the contribution limit.
This gives the participant the benefit of lowering taxable income, which is common for qualified deferred contribution plans. The contribution limit is:
- $22,500 in 2023
- $20,500 in 2022
- $19,500 in 2021
These contributions are contributed through salary reductions in accordance with the Internal Revenue Code 402(g).
457(b) Catch-Up Provision
Catch-up contributions may be allowed for employees nearing retirement. In 2023, if a participant is over the age of 50, they may contribute an additional $7,500.
This makes the maximum contribution limit for a 457(b) plan in 2023 $30,000.
457(b) plans also contain a “double limit catch-up” provision. When an employee is within three years of the retirement age as defined by the plan, they are able to make further contributions to make up for the years when they did not contribute to the plan.
This brings the contribution limit up to $45,000 in 2023.
Contribution matches are possible in a 457(b) plan, but they are not common. If there are any contributions made by the employer, they will count towards the contribution limit for any given year.
457(b) Plan Withdraws
457(b) plans allow for a portion or all of the funds to be withdrawn at retirement, even if a participant is under 59 ½. It is required to pay income tax on the withdrawal amount, just like other deferred compensation plans.
The IRS requires that after the age of 72, required minimum distributions (RMDs) must happen each year.
If the RMDs are not withdrawn from the retirement account, there is a steep tax penalty of 50% of the amount that should have been disbursed.
457(b) Distributions
457(b) plans may offer distributions for unforeseeable emergencies. These emergencies can include:
- Illness or accident of the participant, participant's beneficiary, spouse, beneficiary's spouse, or dependents
- Property loss caused by casualty of the participant or beneficiary
- Funeral expenses of the participant's spouse or dependent
- Other similar extraordinary and unforeseeable circumstances
In order to receive the distribution, the participant must show the emergency expenses could not have been covered by insurance, liquidation, or other means.
Loans in a 457(b) governmental plan may be allowed, however, loans in a 457(b) of non-governmental tax-exempt employers are not.
It is important to note which organization has the 457(b) as some offerings may differ.
457(b) Benefits
A 457(b) retirement plan presents a great opportunity for public employees to save for retirement.
Some of the advantages that come from a 457(b) plan are the ability to lower taxable income and the lack of withdrawal penalty fees.
457(b) Cons
There are some cons such as very few employers offering a contribution match and a lower contribution limit than a 401(K).
The plan structure can seem complex, which is why it is always a good idea to consult with a financial advisor.
457(b) Plan Advisor Services
Langan Financial Group has been working with retirement plans, including 457(b) plans, for over 35 years.
We help provide retirement plan advisory services to numerous municipalities and government employees.
Langan Financial Group will work with organizations to help ensure their retirement plan is providing the best value to the organization and employees it can.
We will:
- Review the plan's design to ensure it aligns with your goals and needs
- Review the plan to ensure it is doing what it is supposed to be doing
- Benchmark the plan to help keep costs competitive
- Benchmark the plan to help keep the organization's liability low
- Engage the employees through financial seminars, one on one financial planning, and other methods to help them with retirement planning
Chat with a 457(b) Advisor
Langan Financial Group's 457(b) advisors have over 100 combined years of experience servicing retirement plans for organizations. Give us a call at 717-288-1880 to see how our local advisors can help with your retirement plans.
Or visit our retirement advisor contact page to fill out an inquiry.
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Financial Advisor Locations:
Camp Hill, PA Financial Planning Office
York, Pa Financial Planning Office
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Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.
Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers. The testimonials are no guarantee of future performance or success. All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA. There was no cash nor non-cash compensation for any of the testimonials provided.
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Harrisburg, PA Office
Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880
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Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085
