What does a 457 plan primarily serve?

A 457 plan primarily serves public sector employees as a retirement savings vehicle that allows them to defer a portion of their salary into an investment account, where it can grow on a tax-advantaged basis until retirement. This type of plan is specifically designed for state and local government employees and some non-profit organizations, providing them with a way to supplement their retirement income.

Unlike other retirement plans, such as 401(k) or 403(b) plans, which might be available to private sector employees or non-profit workers, the 457 plan is distinct in its focus on public entities. It also allows employees to withdraw funds without the typical 10% early withdrawal penalty that may apply to other retirement accounts, making it a flexible option for those in the public sector looking to enhance their retirement savings.

While other options may reference elements like employee benefits or deferred compensation, they do not specifically capture the unique design and purpose of the 457 plan as it pertains to public sector employees.