What is a 457 Retirement Plan?
A 457 deferred-compensation plan is a pre-tax savings plan that is similar to a 403(b). They’re usually tied to hospitals and allow you to defer more income than you’re already putting in your 403(b).
With a 457 retirement plan, you can contribute up to $18.5k if you’re under 50, and $24.5k if you’re over 50.
However, there are some major differences that you should be aware of. First, your contributions are subject to creditors, meaning if your hospital files for bankruptcy, then your contributions that you deferred could be gone.
Some plans offer protection against mergers and acquisitions, meaning if another hospital took over yours, your contributions would still be safe. There is something called a “Rabbi Trust,” which helps offer that protection.
If you leave to go to another hospital, you have to take your 457 retirement plan with you. That means you have about 60 days to roll it over into another 457 plan, or it will be distributed out in a taxable event to you. However, there is no penalty for drawing early. That could work out well if you decide to retire early.
Need more information about retirement plans? Check out my post and video about 401(k)s and 403(b)s here.
Do you need help preparing for retirement? Contact me today to set up an initial meeting. You can also download my free ebook for physicians for tips and information about getting your finances on track.