Contributions to a 457 plan can be pre-tax or after-tax, depending on which option you choose. Most 457(b) plans default to traditional pre-tax deferrals, which lower your taxable income the year you contribute and are taxed as ordinary income when you withdraw. A growing number of governmental 457(b) plans also offer a Roth option, where contributions go in after tax and qualified withdrawals come out tax-free. Your election controls the tax treatment, and in many plans you can split contributions between the two.
How Traditional Pre-Tax Contributions Work
Traditional contributions are the default in most 457(b) plans. Your employer withholds the amount you elect from your paycheck before calculating federal and (usually) state income tax, so the deferral immediately reduces your taxable income for the year. Earn $80,000, defer $10,000, and you’re taxed on $70,000.
Inside the account, the money grows tax-deferred. Dividends, interest, and capital gains accumulate without an annual tax bill. When you take distributions later, every dollar you pull out counts as ordinary income taxed at whatever your marginal rate is at that point. The implicit bet: your rate in retirement will be lower than it is today.
How Roth After-Tax Contributions Work
If your plan offers a designated Roth option, contributions come out of your paycheck after income tax has been calculated. You get no deduction now. In exchange, the account grows tax-free, and qualified distributions in retirement are entirely tax-free.1Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts
A distribution counts as qualified when two conditions are met: you’ve held the Roth account for at least five tax years, and you’ve reached age 59½, become disabled, or died (in which case a beneficiary receives the funds tax-free).1Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts Miss either condition and the earnings portion of the withdrawal becomes taxable.
Not every 457(b) offers Roth. Governmental plans are far more likely to have added it than tax-exempt organization plans. Check your plan document or ask the plan administrator before assuming the option is available.
Payroll Taxes Don’t Follow the Same Rule
One point worth understanding before you decide: even traditional pre-tax 457(b) deferrals do not reduce your Social Security and Medicare taxes. The IRS treats 457(b) plans as nonqualified deferred compensation for FICA purposes, so your deferrals are subject to Social Security and Medicare withholding in the year you earn the wages, not the year you eventually withdraw them.2Internal Revenue Service. Employer Contributions to 457(b) Plans For employee elective deferrals, which are immediately vested, FICA applies at the time of deferral.
The trade-off is that you won’t owe Social Security or Medicare tax on the money again when it comes out in retirement. So “pre-tax” is accurate for federal and state income tax, but it does not mean the contribution escapes all payroll tax on the front end.
Choosing Between Pre-Tax and Roth
The choice comes down to when you’d rather pay the tax. Pre-tax contributions help most if you expect a lower tax rate in retirement than you’re paying now. That describes many people at their peak earning years who plan to draw down modestly in retirement.
Roth contributions tend to work in your favor if you expect a higher rate later, whether because your career is still climbing, because tax law may change, or because required minimum distributions from other retirement accounts could push you into a higher bracket. Younger workers early in their careers often benefit most from Roth, paying tax at today’s lower rate and locking in decades of tax-free growth.
You don’t have to pick one and stick with it forever. Most plans let you change your election at any time and split future contributions between traditional and Roth in whatever proportion you want.
2026 Contribution Limits Apply to the Combined Total
The IRS sets one elective deferral ceiling that covers both types of contributions together. For 2026, the standard limit is $24,500, up from $23,500 in 2025.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Whether you put it all in traditional, all in Roth, or split it, the sum can’t exceed that number.
Catch-up contributions raise the ceiling. If you’re 50 or older by year-end and in a governmental 457(b), you can add another $8,000 in 2026, for a total of $32,500. Participants turning 60, 61, 62, or 63 during the year get a higher SECURE 2.0 catch-up of $11,250 instead, allowing a total deferral of $35,750.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 These catch-ups are only available in governmental plans. The catch-up dollars themselves can be either traditional or Roth, subject to the coming change below.
A Coming Change Will Force Some Catch-Ups Into Roth
SECURE 2.0 added a rule that will pull some higher-earning participants out of the “pre-tax or Roth” choice for their catch-up dollars specifically. If your prior-year FICA wages from the sponsoring employer exceed $145,000 (indexed for inflation), your catch-up contributions to a governmental 457(b) will have to go in as Roth rather than pre-tax. The IRS finalized regulations for this provision, which generally take effect for taxable years beginning after December 31, 2026.4Internal Revenue Service. Treasury, IRS Issue Final Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions
If you’re above the wage threshold, plan on your 2027 catch-up going in after tax. The rule does not change the base deferral limit and does not affect participants earning below the threshold, whose catch-ups can still be traditional or Roth by choice.
Where to Confirm Your Own Setup
The tax treatment of contributions already withheld from your paycheck is shown on your pay stub and your Form W-2. Traditional 457(b) deferrals reduce the wages reported in Box 1 of your W-2 but leave the Social Security and Medicare wage boxes unchanged. Roth 457(b) contributions do not reduce Box 1. If you’re not sure which election is on file, your plan administrator or HR office can confirm it and walk through how to change it if you want a different mix going forward.