Ask Liz Weston

Get smart with your money

457(b)

Q&A: Should I delay my pension payments as long as possible?

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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.

Q&A: Changing jobs? Think about transferring your retirement fund

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Dear Liz: I’m a government employee with a 403(b) supplemental retirement plan. I’m taking a new job out of state and wonder what to do with the money in this account. Should I leave it in the plan, which has been doing great, or transfer it to my new employer’s plan? Also, I have a little money, about $8,000, in a 457(b) deferred compensation plan that I would like to remove for simplicity. Can I transfer this into a brokerage IRA without any tax hit?

Answer: You mention that your current plan has been “doing great,” but it would be surprising if that weren’t the case. As of mid-October, the one-year return for the Standard & Poor’s 500 market benchmark was about 34%.

If your new employer’s plan is a good one, then transferring your money there could be a great option since you’d have fewer accounts to manage and monitor. How can you tell if a plan is good? You’ll see a number of low-cost investment options with expense ratios well under 1%. If you’re a teacher, you can find ratings of school district 403(b) plans at the nonprofit 403bwise (https://403bwise.org/).

You’re allowed to roll your deferred compensation plan into an IRA or your new employer’s retirement plan. You may want to keep the money where it is, however. Once you leave an employer, you’re allowed to access a 457(b) plan at any age without paying a 10% early withdrawal penalty. That could be a perk worth keeping.

Q&A: I’ve got a 457(b), not a 401(k). Are they insured the same?

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Dear Liz: As an employee of a public agency that offers a 457(b) account, it would be helpful to know if these accounts are insured in a manner similar to a 401(k).

Answer: Employer-provided, tax-deferred 457(b) accounts are quite similar to 401(k)s. Both allow employees to make pretax contributions to a retirement account that can be invested for future growth. The accounts aren’t insured the same way bank accounts are, but the money is kept in a separate trust that’s protected from creditors.