Pros of 457(b) Plans:

1. Higher Contribution Limits: 457(b) plans typically allow higher annual contribution limits compared to other retirement plans, such as 401(k)s and IRAs, which can help you save more for retirement.

2. No Early Withdrawal Penalty: Unlike other retirement plans, 457(b) plans allow you to withdraw funds penalty-free before age 59½, as long as you separate from service.

3. Catch-Up Contributions: If you're within three years of the normal retirement age specified by the plan, you may be eligible to make additional catch-up contributions.

4. Deferred Compensation: Contributions to a 457(b) plan are made on a pre-tax basis, reducing your current taxable income and allowing your savings to grow tax-deferred until withdrawal.


Cons of 457(b) Plans:

1. Limited Availability: 457(b) plans are typically offered by state and local governments and certain nonprofit organizations, so they may not be available to everyone.

2. Early Withdrawal Restrictions: While 457(b) plans allow penalty-free withdrawals before age 59½, you must separate from service to qualify, and withdrawals are still subject to income tax.

3. Limited Investment Options: The investment options within a 457(b) plan may be limited compared to other retirement plans, restricting your ability to diversify your investments.

4. Required Minimum Distributions (RMDs): Like other retirement plans, 457(b) plans require you to start taking RMDs once you reach age 73 (or 70½ if you were born before July 1, 1949), which can impact your retirement income strategy.

Required Minimum Distributions (RMDs) for 457(b) Plans:

457(b) plans follow similar RMD rules to other retirement plans. You must begin taking RMDs from your 457(b) account by April 1 following the year you turn 73 (or 70½ if you were born before July 1, 1949), unless you're still working for the employer sponsoring the plan. If you're still working, you may be able to delay RMDs until you retire, depending on the plan rules. RMDs are calculated based on your life expectancy and the account balance at the end of the previous year. Failure to take RMDs can result in substantial penalties.