How Some Workers Can Double Their Tax-Advantaged Retirement Plan Contributions

Workers who have access to both a 403(b) and a 457 plan can supercharge their savings.

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I started a new job at a hospital, and it offers both a 457 plan and a 403(b) plan. Can I contribute the maximum to both, or do I have to pick one or the other?

Like you, many health care workers and public school teachers, as well as other nonprofit and public-sector employees, have access to both a 403(b) and a 457. You should be able to contribute the annual maximum of $18,000 (or $24,000 if you’re 50 or older) to both plans.

Be careful if you switch jobs in the middle of the year and you contributed to a 401(k) or 403(b) with your old employer. The annual $18,000 contribution limit (or $24,000 if you’re 50 or older) applies to both 403(b)s and 401(k)s, so you’ll have to subtract the amount you’ve already contributed from the total when figuring out how much you can contribute to your new employer’s 403(b). But as long as you haven’t contributed to another employer’s 457 in 2016, you’ll be able to max out contributions to the new 457.

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As with 401(k) plans, both 403(b) and 457 plans let you save an extra $6,000 a year when you turn 50. And they have special catch-up contribution rules, too: You may be able to make up to double the contribution to a 457 in the three years before the retirement date specified in the plan, if you haven’t contributed the maximum in the past. For more information, see this IRS publication about 457 contributions. Some employees with 15 years of service with their employer also have a special catch-up contribution opportunity for 403(b)s; see the information sheet at 403(b)wise.com for more information.

Kimberly Lankford
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.

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