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Workplace Retirement Accounts

Depending on the career you choose, there are a number of different paths you can take to save for retirement. Below, you’ll find typical questions about 401(k)s, 403(b)s, 457s, and Thrift Savings Plans (TSPs), which are some of the most common retirement plans that employers offer. We have also included descriptions of each.

Common questions about employer-sponsored retirement plans:

• What are the contribution limits for each retirement plan?
  • Contribution limits are subject to change each year, but you can find the current limits listed here for TSPs and here for 401(k)s, 403(b)s, and 457 plans.
• How does the employer match work?
  • 401(k)s and 403(b)s: The employer gets to decide what kind of match to offer to the employees (a full match, a partial match, a combination of the two, etc.). This match does not count toward the yearly contribution limits.
  • 457 plans: The employer decides the kind of match in this case too. If a match is offered, though, it does count toward the yearly contribution limit.
  • Thrift Savings Plans: All TSP participants must receive at least a 1% match and have the option to receive up to 5%, depending on their own contributions rates.
• Can my employer-sponsored retirement plan roll over to an IRA?
  • Yes, it is possible to roll a 401(k), 403(b), 457, or TSP into both Traditional and Roth IRAs. Typically, this is done after leaving a job or as you enter retirement.
• When do required minimum distributions (RMDs) start on retirement plans?
  • Currently, each plan requires the participant to begin drawing from the account by age 73. More information can be found here for TSPs and here for 401(k)s, 403(b)s, and 457 plans.

Whether you are still contributing to your employer-sponsored plan or you have just retired, a One Day In July advisor can help you figure out your next steps. We can assist you in rolling your plan over to an IRA, discuss the tax implications of withdrawing from your accounts, and more.¹

In some instances, people may have multiple types of retirement accounts from different jobs. Here are some simple definitions of some of the most common employer-sponsored retirement plans.

What is a 401(k)?

A 401(k) is a defined-contribution plan offered by an employer, most commonly within the private sector. Most 401(k) plans provide both Traditional and Roth options, allowing you to make both pre-tax and after-tax contributions up to a specified limit. The former offers you the chance to reduce your taxes today, while the latter allows you to make tax-free withdrawals from your Roth account in retirement. Often, the overall contribution level is left up to the employee (within the designated limit), who can choose how much of each paycheck to set aside for their retirement account(s), or if they would like to take advantage of the employer match that is usually available.

What is a 403(b)?

A 403(b), or tax-sheltered annuity plan, is a retirement plan that is provided by public schools, charities, nonprofits, and other tax-exempt organizations. Generally, the same salary deferral/match decisions, contribution limits, and Traditional/Roth options that apply to a 401(k) also apply to a 403(b).

What is a 457 plan?

There are a few different kinds of 457 plans, but the most common are 457(b) plans. Just like 401(k)s and 403(b)s, they are defined-contribution plans that allow state and local government employees and some workers at tax-exempt organizations to save for retirement. 457 plans are also subject to the same contribution limits as 401(k) and 403(b) plans, and it is possible to designate a portion of your contributions to a Roth account in addition to the traditional option if desired.

What is a Thrift Savings Plan (TSP)?

A Thrift Savings Plan is a defined-contribution plan for federal employees and service members. More specifically, both FERS (Federal Employees Retirement System) and BRS (Blended Retirement System) workers can have a TSP. It is very similar to the above plans in that it also has yearly contribution limits, and there are both Traditional and Roth options available to each participant.

1. The decision to rollover a workplace retirement plan into a personal IRA account should be considered on a case-by-case basis, as it may not always be the most prudent choice, depending on the specific facts and circumstances of the case.