Employees of state and local governments can stash more money in their 457 plans in 2024 than in 2023. Plus, those who are 50 and older can make “catch-up” contributions.
457 contribution limits for 2024
The maximum amount you can contribute to a 457 retirement plan in 2024 is $23,000, including any employer contributions. That’s an increase of $500 over 2023. For example, if your employer contributes $5,000, you're allowed to contribute $18,000 to meet the annual limit. (Most plans, however, don't match worker contributions.)
If you're 50 or older, your plan may allow you to contribute an additional $7,500 as a "catch-up" contribution, bringing your contribution total to $30,500.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There's also a separate catch-up contribution that benefits soon-to-be retirees, if permitted by the 457 plan. If you're within three years of the plan's "normal retirement age," you can save double the annual limit for three years as long as you haven't maxed out your contributions in the past. If you're eligible, that brings your maximum contribution level to $46,000 for 2024 — or up to $138,000 over three years.
However, if you are eligible for both the 50-plus and three year catch-up contributions, the IRS will only allow you to take advantage of the one that adds the most to your retirement account. You can’t do both.
Benefits of a 457 retirement plan
As with contributions to a traditional 401(k) or contributions to a 403(b), money goes into a 457 before you pay income taxes on it. The pretax contributions lower your current taxable income. Meanwhile, your contributions and earnings grow tax-sheltered until you withdraw them. Unlike with the other retirement accounts, the IRS doesn't penalize you for taking early withdrawals from a 457 account before age 59 1/2. But you will pay regular income tax on all withdrawals.
Some 401(k) plans in the private sector automatically enroll workers. But 457 plans generally do not permit auto-enrollment because of state or local laws. So the first step in benefiting from this retirement vehicle is to sign up.
Best investments for a 457 plan
Then, do your due diligence on your investment options. Fees and other costs are always important when evaluating investments.
More 457 plans are adding target-date mutual funds that take a lot of the investment decision-making out of workers' hands. With target-date funds, a worker chooses the fund whose name includes the year closest to his or her expected retirement date. In 2024, a worker planning to retire in about 20 years would select a target-date fund with a year close to 2044 in its name. (Target-date funds typically are named in five-year increments: 2030, 2035, 2040 and so on.) These funds invest aggressively when workers are young and gradually become more conservative as retirement approaches.
For example, a target-date fund meant for workers in their twenties holds mostly stocks. But investments in a target-date fund for someone nearing retirement age may be split evenly between stocks and bonds.
Besides target-date funds, 457 plans generally offer a lineup of index funds, actively managed stock mutual funds and fixed-income funds. They also offer managed accounts, which are professionally managed to match your financial goals and risk tolerance.
Related Content
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
Six of the Worst Assets to Inheritinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2024 and 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024 and 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
-
Is a Medicare Advantage Plan Right for You?Medicare Advantage plans can provide additional benefits beneficiaries can't get through original Medicare for no or a low monthly premium. But there are downsides to this insurance too.
