What other retirement plans exist if a 457 is not your only option

If you work for a government agency or nonprofit and have access to a 457 plan, you may also be able to contribute to other retirement accounts in the same year. The most common are a 403(b) plan (for nonprofit and some government workers), a 401(k) (for some government employees), and Individual Retirement Accounts or IRAs. Each has its own contribution limits, withdrawal rules, and tax treatment. Understanding which ones you can use alongside your 457 helps you save more and choose the account that fits your situation best.

The key question is not whether you can have multiple accounts—you usually can—but how the contribution limits work together and which withdrawal rules matter most to your timeline. A 457 is unusual because it lets you withdraw money penalty-free once you leave your job, regardless of age. Other plans penalize early withdrawals. Knowing this difference helps you decide where to put your money.

Key Takeaways

  • A 403(b) plan is offered by nonprofits and some government employers and works similarly to a 457, with separate contribution limits you can max out in the same year.
  • IRAs (both traditional and Roth) have much lower annual contribution limits than 457 or 403(b) plans but offer different tax and withdrawal rules that may suit your goals.
  • Some government employees can contribute to both a 457 and a 401(k) in the same year, each with its own limit.
  • Employer plans (457, 403(b), 401(k)) have different rules about loans, hardship withdrawals, and when you must start taking money out.
  • Your income level may limit how much you can contribute to a Roth IRA or deduct from a traditional IRA if you also have a workplace plan.

403(b) plans for nonprofit and some government workers

A 403(b) plan is a retirement savings account offered by nonprofit organizations, public schools, and some government employers. It works much like a 457 plan: you contribute pre-tax money from your paycheck, the money grows tax-deferred, and you pay income tax when you withdraw it in retirement. The main difference is that a 403(b) is specifically for nonprofits and certain public employers, while a 457 is for other government agencies.

If your employer offers both a 457 and a 403(b), you can contribute to both in the same year. Each plan has its own annual contribution limit, so you could theoretically max out both if your income is high enough. For example, if the 457 limit is $23,500 and the 403(b) limit is also $23,500, you could put $47,000 total into both plans combined. However, most employers do not offer both, so check with your benefits office about what is available to you.

One key difference between a 403(b) and a 457 is the withdrawal rule. With a 403(b), you generally cannot withdraw money before age 59½ without paying a 10% penalty, just like a traditional IRA. A 457 plan, by contrast, lets you withdraw money without penalty once you leave your job, regardless of age. If you need access to your money before retirement, this matters significantly. This penalty difference is often the deciding factor for people who think they might retire early.

401(k) plans and dual enrollment with a 457

A 401(k) plan is the most common retirement plan offered by private employers, but some government agencies also offer them. If you work for a government employer that offers both a 457 and a 401(k), you can contribute to both in the same year, and each has its own contribution limit. This is different from the rule for 403(b) plans, where contributions to both a 403(b) and a 457 count toward a combined limit in some cases.

The withdrawal rules for a 401(k) are similar to a 403(b): you face a 10% penalty if you withdraw before age 59½, with limited exceptions. However, some 401(k) plans allow loans, which let you borrow against your balance and repay it with interest. A 457 plan typically does not allow loans. If you think you might need to borrow from your retirement savings before retirement, a 401(k) may be more flexible.

Check with your employer's benefits office to confirm whether you have access to both a 457 and a 401(k). Many government employers offer only one or the other, not both. If you do have both, your benefits office can explain how the contribution limits work together in your specific situation.

Traditional and Roth IRAs as a supplement

An Individual Retirement Account, or IRA, is a personal retirement savings account you open on your own, not through an employer. You can have an IRA even if you also have a 457, 403(b), or 401(k) plan. The annual contribution limit for an IRA is much lower than for employer plans—currently $7,000 per year for most people—but IRAs offer flexibility that employer plans do not.

A traditional IRA works like a 457: you contribute pre-tax money, it grows tax-deferred, and you pay income tax on withdrawals in retirement. However, if you have a workplace retirement plan like a 457, your ability to deduct traditional IRA contributions from your taxes may be limited based on your income. The IRS calls this the "active participant" rule. If you earn above a certain threshold and have a 457 at work, you may not be able to deduct your traditional IRA contribution, though you can still contribute the money.

A Roth IRA is different: you contribute after-tax money (money you have already paid income tax on), but withdrawals in retirement are tax-free. Roth IRAs also have income limits. If you earn above a certain amount, you cannot contribute to a Roth IRA directly, though there are workarounds. The advantage of a Roth is that you have more flexibility to withdraw contributions (not earnings) before retirement without penalty, and there is no required withdrawal age like there is for traditional IRAs and 457 plans.

Contribution limits across multiple plans

The IRS sets annual contribution limits for retirement accounts, and the rules differ depending on which plans you have. If you have a 457 and a 403(b), the limits are usually separate, meaning you can contribute the full amount to each. If you have a 457 and a 401(k), the limits are also separate. However, if you have a 403(b) and a 401(k) at the same employer, the limits may combine, so you cannot exceed the total across both plans.

IRAs have their own, lower limit that does not combine with employer plan limits. You can contribute to a 457 and an IRA in the same year without one affecting the other. However, as mentioned above, your ability to deduct a traditional IRA contribution may be reduced if you have an active workplace plan and earn above a certain income level.

Your employer's benefits office or a tax professional can tell you exactly which plans you have access to and how the limits work together in your situation. Knowing the exact numbers matters because exceeding a limit can result in taxes and penalties.

Withdrawal and loan rules across different plans

Each type of retirement plan has different rules about when and how you can access your money before retirement. A 457 plan is unique because it allows you to withdraw money without a 10% penalty once you separate from service (leave your job), regardless of your age. This is called the "separation from service" rule and is a major advantage of 457 plans for people who plan to retire before age 59½.

A 403(b) and a 401(k) both impose a 10% penalty on withdrawals before age 59½, with limited exceptions such as hardship withdrawals or loans. Some 401(k) plans allow you to borrow against your balance, typically up to 50% of your vested balance or $50,000, whichever is less. You then repay the loan with interest. A 457 plan typically does not allow loans. A 403(b) may or may not allow loans depending on the plan.

Traditional and Roth IRAs also have different withdrawal rules. With a traditional IRA, you face a 10% penalty on withdrawals before age 59½ unless you meet an exception. With a Roth IRA, you can withdraw your contributions (the money you put in) at any time without penalty, though withdrawals of earnings are subject to the 10% penalty before age 59½. This makes a Roth IRA more flexible if you think you might need access to some of your savings before retirement.

Required minimum distributions and age considerations

Once you reach a certain age, the IRS requires you to start withdrawing money from most retirement accounts, whether you need it or not. These are called required minimum distributions, or RMDs. For a traditional IRA, a 403(b), and a 401(k), RMDs generally begin at age 73 (as of 2023; this age has changed in recent years, so check current rules). A 457 plan is different: if you are still working for the employer that sponsors the 457, you may not have to take RMDs until you actually retire.

A Roth IRA has no RMD requirement during the account holder's lifetime, which is another advantage if you want to leave the money invested and pass it to heirs. This makes a Roth a good choice if you do not need the money in retirement and want maximum flexibility.

If you have multiple retirement accounts, you need to track RMD rules for each one. Some accounts may require withdrawals while others do not, and the amounts can be complex to calculate. A tax professional or your plan administrator can help you understand your obligations and avoid penalties for missed withdrawals.

Frequently Asked Questions

Can I contribute to a 457 and a Roth IRA in the same year?

Yes. A 457 and an IRA (traditional or Roth) have separate contribution limits, so you can max out both in the same year if your income allows. However, if you have a workplace retirement plan like a 457, your ability to deduct a traditional IRA contribution may be limited based on your income. A Roth IRA also has income limits that may prevent you from contributing if you earn above a certain amount.

What happens to my 457 if I move to a job with a 401(k)?

Your 457 balance stays in the plan unless you withdraw it or roll it over. You cannot roll a 457 into a 401(k) at a new employer because they are different types of plans with different rules. You can leave the money in your old 457 plan, withdraw it, or in some cases roll it into an IRA. Talk to your old employer's benefits office about your options before you leave.

Do I have to take money out of my 457 when I turn 73?

If you are still working for the employer that sponsors your 457, you may not have to take required minimum distributions until you actually retire. Once you retire or leave the job, RMDs begin. Check your specific plan document or contact your plan administrator, because rules can vary by employer and plan.

Can I borrow from my 457 plan like I can from a 401(k)?

Most 457 plans do not allow loans. This is one of the key differences between a 457 and a 401(k). If you need access to your money before retirement, a 401(k) may offer more flexibility through loans, though not all 401(k) plans allow them either. Check with your employer about what your specific plan allows.

What is the difference between a 403(b) and a 457 if my nonprofit offers both?

Both let you contribute pre-tax money that grows tax-deferred, but a 457 lets you withdraw without penalty once you leave your job, regardless of age. A 403(b) imposes a 10% penalty on withdrawals before age 59½. If you plan to retire early, the 457 is more flexible. Each plan has its own contribution limit, so you could contribute to both if your income is high enough.