Retirement Perks Of A Government Retirement Plan

State and local government jobs may not seem like the height of glamour, but they aren't without their perks. Benefits such as pensions, plus access to tax-advantaged government retirement plans known as 457(b) plans, help make working at the county or municipal level more rewarding for local civil servants.

Employees of the federal government do not have a 457(b) plan; instead they have the thrift savings plan, which comes with its own idiosyncrasies.

A 457(b) is roughly analogous to a 401(k), but it comes with its own quirks.

"It's very similar in that you can only defer a certain dollar amount each year, and the amount you can defer is linked to the cost of living (indexes) as the 401(k) is," says Dominick Pizzano, a New Jersey-based employee benefits consultant at Milliman, an actuarial and consulting firm.

The contribution limit is $17,000 for 2012. If the plan allows it, a participant can make Roth contributions to his retirement account, paying taxes on the contribution before it goes into the account. Interest and earnings would be tax-free in retirement.

Also similar to the 401(k) is one of the catch-up provisions that allow workers older than 50 to put away extra money -- specifically an extra $5,500.

Now for the curve ball: 457(b) plans also may allow workers to squirrel away extra money starting three years before the so-called normal retirement age, which the plan specifies.

The normal retirement age can vary, but the special contributions can begin three years before that point.

"So if someone was to retire at 50, at 48 they could begin the 457 catch-up because it's three years prior to their retirement age. It's called the three-year rule," says Julia Durand, director at CalSTRS and president of the National Association of Government Defined Contribution Administrators, or NAGDCA.

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The perks of a government retirement plan