A 457 retirement plan is a retirement savings account offered to government employees and some employees of nonprofit organizations, states CNN Money. Advantages over other retirement plans include no penalties for early withdrawals and enhanced catch-up contribution options, reports Kiplinger.
Those eligible for 457 plans include civil servants such as police and firemen and high-salaried executives of nonprofits such as unions, hospitals and charities, according to About.com. Funds placed into a 457 account and the interest earned are tax-deferred, meaning the IRS only taxes the money when the account holder withdraws it for retirement. Those with 457 plans can contribute up to $18,000 annually as of 2015, as reported by the IRS. Additionally, according to the catch-up contribution option, the plan's holder can put in double the usual amount in the final three years before the retirement age stipulated in the plan, states Kiplinger.
Employees can combine 457 plans with other retirement plans and pay in the maximum allowable contributions to both plans, reports About.com. Unlike IRA and other retirement accounts that impose additional taxes as penalties for early withdrawal, holders of 457 accounts do not have to wait until they are 59 1/2 to start using the funds. They can access the funds at any time, without penalty.