What is the main difference between a 457 plan and 403(b) plan, and how much can I contribute to both?
457 plans and 403(b) plans are quite similar. However, there are a few important differences. If you take money out of your 403(b) plan before you reach age 59 1/2 and are still working, or you leave your job but are not yet age 55, you may have to pay an extra 10% penalty on top of the ordinary income taxes that will be due on the distribution. In addition, 457 plan participants may be able to invest in a wide variety of vehicles, but 403(b) plan participants are limited to annuities and mutual funds. There is no 10% penalty for early distributions from a 457 plan. However, you generally cannot take in-service distributions unless you have an unforeseen emergency. The other main difference between 457 plans and 403(b) plans is how they are held. 403(b) contracts are held by you, the employee, either in an annuity or a custodial account if you invest in mutual funds. The assets in a 457 plan are held in a contract by the employer. However, these funds are protected from the district’s
