Can You Contribute to Both a 401(k) and a 457 Plan?

Contribution Limits for Contributing to Both a 401(k) and a 457 Plan

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Retirement is looming. Maybe it's still technically distant, still out there on the horizon somewhere, but you're thinking about it more now than you did 10 years ago. 

How's your financial plan coming along? Have you been pretty much idle these last 10 years so you now find yourself in a bit of a catch-up situation? If so, you might wonder if it's possible to contribute to both to a section 457 retirement savings plan and to a section 401(k) plan.

A reader recently asked: 

"In addition to deferring $18,000 in a 457 plan, can you also defer in other plans like a 401k? Can you point me to supporting IRS or other documents? I have both a 401k and a 457b plan. My combined deferrals this year exceed $18,000. My TaxCut program appears to assume that you can only defer $18,000 for all plans. I'd like supporting documentation to find out if I can override the program."

Yes, You Can Do Both 

The answer to this question is yes. You certainly can contribute to both a Section 457 retirement plan as well as a 401(k) plan because each plan has separate limitations on the amount of money an employee can put in. Large government employers often offer their employees both 401(k) and 457 plans, which enables those employees to contribute to both plans and thus have an opportunity to supercharge their retirement savings.

457(b) Plan Limits 

The annual limit for all contributions made to 457(b) plans is 100 percent of the employee's includable contribution or the elective deferral limit, whichever is less.

The elective deferral limit is $18,500 as of 2018. The limit was set at $18,000 from 2015 through 2017.

State and local governments can contribute more to employees who are age 50 or older. If the plan allows it, the employee can double his contributions in the three years immediately preceding retirement provided he's at least age 50, increasing them to $37,000 in 2018 or $36,000 in 2015 through 2017.

401(k) Plan Limits

The salary deferral limit for 401(k) plans as of 2017 is $18,000. This increases by $6,000 if you're age 50 or older. It goes up to $18,500 in 2018, although the catch-up 50-or-older limit still stands at $6,000. 

Additional Resources

Here's some supporting information about contribution to and tax treatment of both types of plans if you want to do some further research. But the bottom line is that you and your employer absolutely can contribute to both plans provided that each stays within these limits. It should also be noted that these limits are indexed for inflation and obviously increase periodically, so you most likely won't be stuck with the 2018 limitations forever if you are trying to catch up.

Note: Always consult with a tax professional for the most up-to-date information and trends. Tax laws and rules can change periodically. This article is not tax advice and it is not intended as tax advice.