Dear Liz: I work for a local government and my job offers a pension as well as a 457 deferred compensation plan. If I delay starting my pension, will it have the same 8% growth that Social Security offers? Is my 457(b) plan much better than 401(k)?
Answer: Government pensions and Social Security both offer guaranteed income for life, but use different formulas for determining benefits.
Social Security is generally based on the worker’s 35 highest-earning years. Recipients can earn an 8% annual boost in their retirement benefit for each year they delay starting after their full retirement age, until benefits max out at age 70.
Pensions, meanwhile, are typically based on a combination of age, final salary and years of service. Delaying retirement typically does increase your benefit, but how much depends on the details of your plan. Many plans offer tools for estimating your future benefits, or you can contact your human resources department.
Your 457(b) plan has much in common with a 401(k). Both allow workers to contribute pretax money through payroll deductions up to certain limits ($24,500 in 2026, with an additional $8,000 catch-up contribution for those 50 and older, plus an additional $11,250 for those 60 to 63). The amount you ultimately get in retirement isn’t guaranteed but depends on how much you contribute and how the investments you choose perform over time.
A major difference between the two types of plans: 401(k)s typically offer some kind of matching funds, while 457(b)s often do not. On the other hand, early withdrawals from a 401(k) are usually penalized, while you can generally withdraw money from a 457(b) penalty-free after you leave your job.