457 Plan Withdrawal Calculator

How much tax will you pay on your earnings?

A 457 plan is a great tool to supplement your retirement. It can offer more flexibility than other savings accounts while providing the same great benefits. Here you can figure out how much tax you would incur if you took money from your savings. You can also find out if there would be any penalties for your withdrawal. On this page, you can find all the details regarding 457 plans, including account rules, limits, and provisions.
What is a 457 plan?
A 457 plan is similar to 401(k), and 403(b) tax-favored saving accounts , but has its quirks. At the core, it’s a plan that helps participants secure money for their retirement. 401(k)s are used in the corporate world and 403(b)s for non-profits, while 457 plans are made for government employees.
457 plans are catered to firefighters, police officers, and highly paid executives at unions and hospitals. 457 programs also extend to other state and local government workers.
These plans all function in relatively the same way. Any money you contribute to your savings plan grows tax-free, along with your investment returns, until you retire. Since the deposits are made from your income before tax, there is an added advantage of tax savings.
There are limits to how much you can put in the account and specific rules set out by the IRS. The policies on 457 plans are what set them apart from the other retirement savings accounts.
How much can you contribute to a 457 plan?
If your employer offers a 457 plan, you can make contributions from your paycheck before tax. The program allows you to choose between a mix of investments to help grow your savings. You can diversify your selections between stocks and mutual funds to get the security and growth you are comfortable with.
The contribution limits are the same between 457b, 403b, and 401k plans. You can invest up to $18,000 of your pre-tax income per year. The maximum amounts increase every few years to adjust for inflation. Typically the adjustments are made in $500 increments.
There are catch-up contributions if you are over the age of 50. This specification allows you to increase your limit by $6,000 a year until you retire.
There is another catch-up provision that is unique to the 457b. You could double your limit three years before retirement if you haven’t maxed out your savings in previous years. That means you could invest up to $36,000 three years in a row. With the power of compounding interest, that could really give your savings a boost. The only restraint is that your deposits can’t exceed 100% of your compensation.
If your employer offers 403b or 401k in addition to a 457b, you could actually make full deposits to both. Teachers often have this option. By contributing the total amount to both accounts, you could save an annual $36,000 well before retiring. If you have catch-up contributions or employer matching, you can secure even more money for your retirement.
457b plans usually do not provide employer-matching contributions. Government jobs come with pensions, so the 457 plan is meant to supplement that security. When combined with social security benefits, it’s possible to have a very comfortable retirement.
Another feature unique to the 457b is the penalty-free plan withdrawals. There is no penalty for taking out your earnings before the age of 59½.
Your 457 plan withdrawals
Unlike 403b and 401k plans, there is no 10% early withdrawal penalty. If you decide to retire early, you could begin taking payments immediately. Of course, it’s always best to let your money compound as long as possible to maximize your earnings. Since your earnings are considered regular income, they would be taxed at your marginal tax rate.
How to use the 457-plan withdrawal calculator
The 457 withdrawal calculator is very easy to use. It is designed to help you work out how much tax you will pay on any funds you take from the account. It just requires a few simple details. The system only works with contributions that are made pre-tax, not Roth. Let’s review the questionnaire together.
Step 1: On the first line of the calculator, identify the dollar amount you would like to take from the account. You can use the up or down arrow keys or your keyboard to make this input easier.
Step 2: Add your age to the second line of the calculator.
Step 3: Include your federal income tax rate on line three. It is essential to assess your income after deductions, plus any interest earnings. If you are unsure, you can find out your marginal tax rate here.
Step 4: Lastly, add your state income taxes to the final line of the calculator.
Step 5: View your results.
Below the inputs, you will receive a prompt of your net withdrawal. You can view the exact dollar amount that will go towards taxes in the bar graph report. Using the graph, you can compare the amount you would be left with, in red, versus the taxes owed in blue.
Sometimes it can be more beneficial to let your funds grow in your account. Once you retire, you might reach a lower tax bracket and get a higher percentage of your earnings. You can also try out Roth contributions to get tax-free earnings in retirement.
Remember to bookmark this calculator. You can save it to the home screen of your smartphone or tablet to get quick access to this tool. You can return if your tax bracket changes and to try out different withdrawal amounts. If you found this page useful, please promote us on social media by using the share feature.