457(b)
A deferred compensation plan for state and local government workers, with no early-withdrawal penalty on separation.
A 457(b) is a deferred compensation plan offered mainly by state and local governments and some tax-exempt employers. Contribution limits track the 401(k) and 403(b), and traditional and Roth options are both common.
Its distinguishing feature is genuinely valuable for early retirement: withdrawals from a governmental 457(b) after you separate from service are not subject to the 10% early-withdrawal penalty, at any age. There is no waiting until 59 and a half, no Rule of 55 age threshold, and no need for a Roth conversion ladder or a 72(t) schedule to reach the money. That makes it one of the cleanest bridges available for the years between leaving work and normal retirement age.
Two cautions. The penalty exemption applies to governmental 457(b) plans; non-governmental ones carry meaningful creditor risk because assets remain the employer's property until paid. And rolling a 457(b) into an IRA forfeits the penalty exemption entirely, so a rollover that looks like tidy consolidation can quietly close the door this account was worth keeping open for.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.