Governmental 457(b) Deferred Compensation: Rules & Compound Growth
A governmental 457(b) plan is a non-qualified, tax-advantaged deferred-compensation retirement plan available to state and local municipal employees, public school educators, law enforcement officers, and firefighters.
No 10% Early Withdrawal Penalty
Unlike 401(k) and 403(b) accounts, governmental 457(b) plans allow penalty-free distributions at any age once you separate from your employer (subject only to regular ordinary income tax).
Dual Contribution Limits
If your public employer offers both a 403(b) and a 457(b), you can contribute the full annual elective deferral limit ($23,000+ base) to both plans simultaneously, doubling your tax-sheltered savings.
Monthly Compounding Future Value Formula
FV = Initial Principal × (1 + r)^n + Monthly Contribution × [((1 + r)^n - 1) ÷ r]
Where r is the monthly rate of return (annual return ÷ 12) and n is total months to retirement.
