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457 plan

A 457 plan is a tax-deferred retirement savings account available to state and federal employees as well as employees of certain tax-exempt organizations.

Expanded Definition

The 457 plan is kind of like a 401(k) retirement savings plan in that it allows government employees to contribute up to a set amount, and that amount as well as any earnings on it grow tax free until paid out to the (former) employee in retirement. However, there is never a matching contribution from the employer (the state or federal government) as there often is for 401(k) plans.

Employees of eligible tax-exempt organizations should take extra care when deciding whether to enroll in a 457 plan, as rules about how the money is invested and whether creditors have access to it could affect whether their money is there when they retire.

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