Retirement savings: Comparing Roth IRA and 457(b) advantages

Financial expert Douglas Boneparth, founder of Bone Fide Wealth, has analyzed the comparative advantages of Roth IRAs and 457(b) retirement accounts.

The 457(b) plan, typically available to employees of certain state and local governments or tax-exempt organizations, offers a distinct advantage for those considering early retirement. Unlike a 401(k), it does not impose a 10% early withdrawal penalty before age 59½. Additionally, contributions to a 457(b) reduce current taxable income.

In contrast, the Roth IRA provides tax-free growth and tax-free withdrawals during retirement. Because Roth withdrawals do not count toward income thresholds that determine the taxation of Social Security benefits, they offer greater flexibility if future tax laws or Social Security benefit structures change.