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Roth IRA and 457(b) plans both provide tax-advantaged ways to save for a secure retirement. Roth IRA accounts are funded with after-tax dollars that then grow tax-free. A 457(b), meanwhile, is like a 401(k) for certain government and non-profit employees.
A financial advisor can help you learn about different retirement planning strategies and evaluate your options.
Roth IRA Basics
Roth IRA retirement accounts are funded with after-tax dollars. This means you can’t deduct money contributed to a Roth IRA from your current income when filing your tax return. However, you don’t have to pay taxes on earnings from investments in a Roth IRA. And you can withdraw contributions without owing taxes at any time.
In addition to enjoying tax-free growth, you can make withdrawals of earnings from a Roth IRA without owing taxes or penalties, as long as you are over age 59 ½ and it has been at least five years since you made your first Roth contribution. If you are younger or haven’t had the account for five years, you may owe taxes plus a 10% penalty according to Roth IRA withdrawal rules..
Unlike most other retirement accounts, Roth IRAs are not subject to required minimum distributions (RMDs) – mandatory withdrawals that start at age 73 (or 75 if you were born in 1960 or after). This can be a significant advantage depending on your circumstances.
Anybody can open a Roth IRA as long as they have earned income. A Roth IRA does not have to be sponsored by an employer as, for instance, a 401(k) does.
However, there are Roth IRA income limitations, however, as well as caps on annual contributions. The most you can contribute to a Roth IRA for 2026 is $7,500. You can save up to $8600 if you’re age 50 or older.
Your annual allowed contribution may be lower if, in 2026, you make more than $153,000 and your tax filing status is single or $242,000 and you file jointly. This amount also adjusts annually for inflation. The allowed Roth IRA contribution may decline as your modified adjusted gross income (MAGI) increases until, at $168,000 for single filers and $252,000 for joint filers, no contribution is allowed.
You may be able to get around the contribution limits by contributing first to a traditional IRA and then converting that account to a Roth IRA. This is known as a backdoor Roth IRA.
457(b) Basics
Some state and government local employees, as well as non-profit workers, can use a 457(b) plan to save for retirement. These are typically tax-deferred accounts, so savers can deduct contributions from current taxable income, providing immediate tax savings. However, Roth contributions using after-tax dollars can also be made to 457(b) plans.
Contributions to 457(b) plans are also limited. For 2026, participants in 457(b) plans can defer up to $24,500 in earnings to contribute to the plan (up from $23,500 in 2025). Savers age 50 or older can add $8,000 for a total contribution of $32,500 (up from $31,000 in 2025).
Also, 457(b) account owners who are between 60 and 63 years old can make an even larger catch-up contribution of $11,250 instead of the standard $8,000. This enhanced contribution limit also applies to 401(k)s, 403(b)s and the federal government’s Thrift Savings Plan.
In addition to providing current tax deductions, contributions to a 457(b) account can be invested and grow tax-deferred. This is similar to the way traditional IRAs and other retirement plans treat contributions and earnings.
A 457(b) plan participant has more flexibility than other retirement savers when withdrawing funds. If the employee leaves their job, for instance, they can withdraw funds without any penalties, even if they’re younger than age 59 ½. Participants in 457(b) plans can also roll the accounts over into other retirement accounts, including IRAs and 401(k)s if they leave their jobs.
Withdrawal and Distribution Rules in Retirement
Roth IRA withdrawals follow a clear structure. Contributions can be taken out at any time without tax or penalty. Investment earnings are tax-free if the account holder is at least age 59½ and the account has been open for five years. If earnings are withdrawn earlier, income tax and a penalty generally apply, with limited exceptions defined by IRS rules.
A 457(b) plan operates differently once withdrawals begin. Distributions from a traditional 457(b) are taxed as ordinary income because contributions were made on a pre-tax basis. A key feature is that withdrawals are not subject to the early withdrawal penalty after separation from service, regardless of age. This makes 457(b) plans distinct from 401(k) and 403(b) plans for workers who retire or change jobs earlier.
Roth 457(b) accounts combine features of both structures. Contributions are made with after-tax dollars, and qualified withdrawals of earnings are tax-free if age and holding-period rules are met. Unlike Roth IRAs, Roth 457(b) accounts are subject to required minimum distributions while held in the plan. Many participants address this by rolling the account into a Roth IRA after leaving employment.
Required minimum distributions (RMDs) create another point of separation. Roth IRAs have no lifetime RMDs for the original owner, which allows assets to remain invested indefinitely. Traditional 457(b) accounts require distributions beginning at the applicable RMD age. These rules affect taxable income in retirement and the timing of when savings are drawn down.
Withdrawal rules and required minimum distributions can significantly affect retirement taxes and long-term cash flow. Use SmartAsset’s retirement calculator to estimate how different account types and withdrawal strategies may impact your financial future.
Retirement Calculator
Calculate whether or not you’re on track to meet your retirement savings goals.
About This Calculator
To estimate how much you may need to save for retirement, we begin by calculating how much you're expected to spend over the course of your retirement. This includes estimating the income you'll need based on your lifestyle preferences, then factoring in how many years you may spend in retirement. We assume a lifespan of 95 by default, though you can adjust it after your calculation is complete.
Once we have a clearer view of your total retirement needs, we use our models to evaluate your existing and future resources. This includes estimating retirement income from Social Security and the impact of current retirement plans, pensions and other accounts. For additional inputs and a comprehensive retirement plan, please see our full Retirement Calculator.
Assumptions
Lifespan: We assume you will live to 95. We stop the analysis there, regardless of your spouse's age.
Retirement accounts: We automatically distribute your future savings optimally among different retirement accounts. We assume that the IRS contribution limits for your retirement accounts increase with inflation.
Social Security: We estimate your Social Security income using your stated annual income and assuming you have worked and paid Social Security taxes for 35 years prior to retirement. Our estimate is sensitive to penalties for early retirement and credits for delaying claiming Social Security benefits.
Return on savings: We assume the percentage return on your savings differs by whether you're pre- or post-retirement and by account type, with a distinction between investment accounts and savings accounts. This assumption does not account for market volatility or investment losses and assumes positive growth over time. All investing involves risk, including the possible loss of principal.
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Comparing Roth IRA and 457(b) Plans
Here’s a table directly comparing important features of Roth IRA and 457(b) plans:
| Roth IRA | 457(b) | |
|---|---|---|
| Who can own one | Anyone with earned income below an annual limit | State or local government workers, and non-profit employees, if offered by the employer |
| Tax treatment of contributions | After-tax contributions are not deductible from current income | Pre-tax contributions deducted from current income |
| Tax treatment of investment growth | Can be withdrawn without owing income tax after age 59 ½ if the account is at least five years old | Taxes deferred until withdrawal |
| Annual contribution limits for savers under the age of 50 in 2026 | $7,500 | $24,500 |
| Penalty on withdrawals before age 59 ½ | No penalty on withdrawals of contributions; 10% penalty on withdrawn earnings | No penalty on withdrawals of earnings or contributions if the saver has left their job |
| Taxes on withdrawals of investment earnings before age 59 ½ | No taxes on withdrawals of contributions; withdrawn earnings are taxed according to your tax bracket rate | Taxes applied to withdrawals of contributions and earnings |
Bottom Line
Roth IRA and 457(b) accounts offer tax-advantaged ways to save for retirement. Almost anyone can open a Roth IRA account, while 457(b) plans are only available to employees of state and local governments that sponsor the plans, and some non-profit workers whose employers offer them. Roth IRAs are funded with after-tax dollars, while 457(b) plans can be funded with pre-tax or after-tax dollars.
Tips for Retirement
- Consider discussing your plan for retirement with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- SmartAsset’s Retirement Calculator tells you how much you will need to save every month in order to have enough to meet your anticipated financial needs in retirement.
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