What is the primary purpose of a 457b plan?

The primary purpose of a 457(b) plan is to provide a retirement savings option for employees, particularly for governmental and certain nonprofit organizations, allowing them to save for retirement on a tax-advantaged basis. Contributions to a 457(b) plan are made with pre-tax dollars, which means that the money is taken out of the employee's paycheck before taxes are applied, thereby reducing taxable income in the year the contributions are made. This pre-tax feature allows for tax-deferred growth of investments until they are withdrawn, typically at retirement when the individual may be in a lower tax bracket.

By enabling employees to dedicate a portion of their income toward retirement savings in a tax-efficient manner, the 457(b) plan encourages individuals to save more effectively for their future needs.