Growing Your Assets for Your Future
While defined-benefit (DB) pension plans remain a cornerstone of many public sector retirement plans, statistics show 457 plans becoming more popular for public service employees to save on a tax-deferred basis with benefits like “catch-up contributions" and more diversification. Participants rarely get a match from their employer because they are enrolled in a defined benefit plan (where only the employer contributes), but they can contribute, and even retire earlier than 59 1/2 without penalty.
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What is a 457?
A 457(b) plan is like a 401(k), but for state/local government employees, and tax-exempt organizations. You can save for your retirement through before-tax salary reductions The normal contribution limit for a 457 plan is increased to $23,000 in 2024.
Employees age 50 or older may contribute up to an additional $7,500 for a total of $30,500. Employees taking advantage of the special pre-retirement catch-up may be eligible to contribute up to double the normal limit, for a total of $46,000. For more details, see this link to the IRS site https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-contributions
A Wide Range of Options
It's fascinating to learn that in recent years, many employers have chosen to augment their retirement plans by offering a brokerage window, also referred to as a Self-Directed Brokerage Account (SDBA). This option has been integrated into more than 100,000 401(k), 403(b), and 457 plans across the United States. By providing a brokerage window, employers are providing their employees with a broader range of investment options and greater flexibility in their retirement planning.
In addition, this option also allows employees to seek professional in-plan financial advice on their assets, providing them with a comprehensive retirement planning experience. With this feature, employees can make informed investment decisions and take advantage of the expertise of financial professionals to ensure that their retirement funds are being managed optimally.
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Working with Your Financial Advisor
Planning for retirement is a crucial aspect of personal finance, and a 457 plan can be a vital component of your retirement savings strategy. With its flexibility and tax benefits, a 457 plan can provide a solid foundation for your future financial security. However, to make the most of this retirement savings option, it's important to seek the guidance of a knowledgeable financial advisor who can help you determine if you're saving enough and selecting the right investment options that align with your unique needs and preferences. By working with a trusted advisor, you can gain confidence that you're making informed decisions and taking steps to secure your financial future.
How does SBDA Work?
For many years, the investment options offered in workplace retirement plans were limited to a pre-selected list of mutual funds and annuity contracts. Today, thousands of employers have enhanced their retirement plans to include a brokerage window opportunity so that plan participants have more choice and greater flexibility with their retirement investments. This option, known as the Self-Directed Brokerage Account (SDBA), exists in 401(k), 403(b), or 457 plans where participants have access to stocks, bonds, mutual funds and ETFs. Through The Pacific Financial Group, you can access to products from the world’s largest and most respected investment managers, customized to your own personal tolerance range.
