What are the tax advantages to contributing to a governmental 457 plan?
The money you earn is tax deferred. The federal government and most state governments will defer taxing you on the money you pay in, and they will not tax any of your investment profits, until you withdraw money. If you invest money prior to paying taxes more of your money goes to work for you immediately. For instance, if you pay in $100 (and are in the 28 percent tax bracket), your federal income-tax withholding will be reduced by $28. That means that your $100 contribution only “costs” you $72 of your take-home pay.
