Section 457 Retirement Plan

By: Miodrag Trajkovic

There are many different types of retirement plans in existence and there are probably some you have never even heard of. When it comes time to plan your retirement, it is to your benefit to seek these plans out so you know all your options and which will work best for you. You have probably heard of a 401k but have you heard of a Section 457 Plan?

The Section 457 Plan is for employees of government or other tax exempt organizations such as churches. Employees of such institutions can make up to $15,000 per year in tax free contributions. Each year after 2006, the amount increases by $500 each year. Withdrawals from this plan may be subject to penalties. If money is withdrawn before the age of 59 1/2 for example, there is a penalty applied. In certain instances, the penalty might be avoided. In certain hardship cases and termination of employment, it might be possible to withdraw cash without penalty fees.

The Section 457 Plan actually has much more lenient withdrawal policies than other plans do. However, money must be withdrawn before the age 70 1/2 or penalties will be applied. This money can roll over into a different retirement account without penalty though.

The Section 457 Plan is somewhat limited but is worth checking into if you are eligible and your employer qualifies for it. It could really be a tax saver for you. You would be able to contribute a nice investment sum tax free so if you work for the government or a non profit agency, check with your employer to see if this option is available to you.

Retirement planning is often put on the back burner since there are so many other things which take up our time and energy in life. But the ting about saving for retirement is that the sooner you start, the more you will have saved and earned through interest by the time you retire. When you do reach retirement age, you will be glad you took the time to carefully plan your future.

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