State and local government employees can invest more in their 457 plans in 2026 than in 2025. Similar to the better-known 401(k) plan in the private sector, the 457 plan (sometimes called a "457(b) plan") allows employees to deposit a portion of their pre-tax earnings in an investment account.
The 457 plan is also a tax-advantaged account. That means employees postpone paying taxes on the money invested in the 457 until the funds are withdrawn after they retire. This makes a 457 plan a vital part of retirement planning for government employees..
Unlike most other retirement accounts, your 457 plan may offer three types of catch-up contributions: the age 50+ catch-up provision, the super catch-up provision for people age 60-63 and the pre-retirement three-year catch-up provision.
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457 plan contribution and catch-up limits for 2025
The maximum amount you can contribute to a 457 retirement plan in 2025 is $23,500, including any employer contributions.
For example, if your employer contributes $5,000, you can contribute up to $18,500 to meet the annual limit. (Most 457 plans, however, don't match worker contributions).
The age 50+ catch-up provision. If you're 50 or older, your 457 plan may allow you to contribute an additional $7,500 as a "catch-up" contribution, bringing your total allowable contribution to $31,000 in 2025.
457 plan contribution and catch-up limits for 2026
For 2026, the standard employee contribution limit to a 457 plan is $24,500 (up from $23,500 in 2025). If you are age 50 or older, many plans allow an additional $8,000 in catch-up contributions, bringing your total to $32,500 in 2026.
On top of that, many governmental 457 plans offer another option: The special “three-year catch-up" (if permitted by the plan) that lets you defer up to roughly double the normal limit, or potentially $49,000 in 2026.
Special three-year catch-up:
According to the IRS, if you are within three years of your plan’s normal retirement age, you may be eligible to contribute an additional amount over the regular deferral limit to make up for the years you did not contribute the maximum amount you were eligible to contribute under your current 457 plan. But, you must be currently employed and participating in your employer’s 457 plan.
No double-dipping. However, if you are eligible for both the 50-plus and 3-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.
Read: Catch-Up Contributions for Higher Earners in 457(b) Plans: What You Need to Know
SECURE 2.0 catch-up contributions 60-63:
Starting in 2025, SECURE 2.0 made it possible to save even more with enhanced catch-up contributions for certain older adults. That means if you’re 60, 61, 62, or 63, you may be able to take advantage of this provision and increase your savings for retirement. If you're 59 or 64, this super catch-up contribution does not apply.
This 60-63 catch-up contribution limit in 2026 is $11,250 (the same as in 2025). Remember that once you reach 64, these limits revert back to the standard age 50+ catch-up contribution limit.
Benefits of a 457 retirement plan
As with contributions to a traditional 401(k) or to a 403(b), your money goes into a 457 plan before you pay income taxes on it. That means the pretax contributions lower your current taxable income. Meanwhile, your contributions and earnings grow tax-sheltered until you withdraw them. Unlike most 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 plan is to sign up.
How is a 457 different from a 401(k)?
401(k) and 457 retirement plans have similarities and differences to consider. The most obvious difference is that 457 plans are primarily offered to government employees, including state and local government officials, city and county employees, public school teachers and first responders. By contrast, 401(k) retirement plans are typically offered by private employers.
401(k) plans | 457 plans |
Offered to private sector employees | Commonly offereed to government workers |
Generally, employers match employee contributions | Rarely match employee contributions |
10% penalty on early withdrawals before age 59-1/2 | Withdrawals before the age of 59-1/2 are not subject to a 10% penalty |
Roth options are available | Roth options are available |
Loans are allowed | Loans are allowed |
Often offer auto-enrollment | Generally do not permit auto-enrollment |
Best investments for a 457 plan
After you sign up, do your due diligence regarding investment options. Fees and other costs are always important when evaluating investments.
Many 457 plans now offer target-date mutual funds that take much 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 2025, a worker planning to retire in about 20 years would select a target-date fund with a year close to 2045 in its name. (Target-date funds typically are named in five-year increments: 2035, 2040, 2045 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.
457 plans: What you need to know
Similar to a 401(k), a 457 or 457(b) plan applies to employees of government agencies, nonprofit organizations and public service workers. With this plan, employees can save pre-tax earnings in an account, reducing their annual income taxes while also deferring any taxes due until the money is withdrawn in retirement. Governmental 457(b) plans may also be adapted to allow designated Roth contributions and in-plan rollovers to designated Roth accounts.
Keep in mind that employees are not automatically signed up, so reach out to your plan manager or financial advisor so you don't miss out on a potentially lucrative opportunity to save for your retirement.
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