Who can Invest in a 457b Retirement Plan

Retirement is right around the corner for everyone who is currently working. It might not seem like it for those who are in their 20’s, but life will catch up to them at some point. This means that proper retirement planning now can make a world of difference when you are ready to retire. One savings plan is the 457(b) plan, but is it a proper retirement savings vehicle for you?

A 457(b) plan is open to anyone who works for a state or local government agency , or is part of an exempt organization. The limits for the plan were 16,500 dollars in 2010 and the amount will remain the same for 2011. Employers take the money through salary deductions and the employee allows for a reduced salary in exchange for the tax free contribution.

Employers then take the money that has been deducted and put it in the hands of an investment firm. The money is then guaranteed by the federal government as secure until the individual retires. 457(b)wise has a great set of FAQ’s that refer to the details of the plan, and other benefits that the plan offers.

Why would someone invest in this plan? Investment into this retirement account will lower taxable income while providing a nice nest egg for retirement. The money will grow as it stays in the stock market for as long as the money is in the account. There are even tax credits for those who don’t earn much, but still wish to invest money into the account.

Also consider that there are “catch-up” clauses in the plan as well. Those over the age of 50 can invest as much as 200 percent of the maximum. This means that an investor over the age of 50 could invest $31,000 in one year.

For those who don’t necessarily have the money to invest right away, inquire about a government loan. While the opportunity to obtain loans are still in the proposal stage, there has been enough momentum that those who are going to invest in a 457 have been advised to ask about any loan opportunities available to them.

If you are a state or local government employee, it could be well worth your while to invest in a 457(b) plan. The income is tax free until retirement and the money will only grow as long as you continue investing. It might hurt to have a lower salary now, but it will be nice to see that hard work pay off when you have a stable and happy retirement.