How does the 457b/401k special catchup rule work after retirement?
I'm 60 and retired from state government back in June. I contributed $40,500 to my 457b plan this year (including my vacation/sick leave payouts). I've taken a part-time position at a local business that doesn't pay great, but surprisingly they offer a 401k with employer match even for part-timers like me. I'd really like to take advantage of this match (free money, right?), but I'm concerned about hitting contribution limits since I already put so much into my 457b. Would I be okay if I kept my 401k contributions under $5,500 for the remainder of this year? Or should I just wait until January to start contributing to avoid any potential issues? I don't want to mess anything up with the IRS!
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Talia Klein
The good news is that 457b plans and 401k plans have separate contribution limits! For 2025, the basic limit for each is $23,500. At age 60, you're also eligible for catch-up contributions of $7,500 for each plan type. The 457b special catch-up rule allows you to contribute up to twice the annual limit if you're within 3 years of the normal retirement age specified in your plan, but this only applies to the 457b plan, not the 401k. Since you've already contributed $40,500 to your 457b this year, you've likely utilized both the standard limit and some form of catch-up provision. However, this doesn't affect what you can put into your 401k at your new job. You can still contribute up to the full 401k limit ($23,500 + $7,500 catch-up) regardless of your 457b contributions.
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Cedric Chung
•Thanks for this detailed answer! So just to be clear, my 457b contributions ($40,500) don't count against what I can put into my 401k? That seems too good to be true! Does that mean I could theoretically put in another $31,000 ($23,500 + $7,500) into my 401k this year if I had the money?
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Talia Klein
•That's exactly right! The 457b and 401k have separate limits, and contributions to one don't count against the other. You could indeed contribute up to $31,000 to your 401k this year ($23,500 standard limit plus $7,500 age 50+ catch-up) regardless of what you've already put in your 457b. This is one of the benefits of having worked for a government employer - the ability to essentially double your tax-advantaged retirement savings. Just make sure you have sufficient earned income from your new job to cover whatever you contribute to the 401k.
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Maxwell St. Laurent
After I left my county job last year, I was in the exact same situation with my 457b and a new employer 401k. I was totally confused about the limits and spent hours trying to figure it out online. I finally used https://taxr.ai to upload my retirement account statements and answer my questions about contribution limits. Their system actually explained the whole separate limit situation for 457b vs 401k plans and confirmed I could max out both in the same year. Saved me from leaving free employer match on the table because I had been afraid of overcontributing!
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PaulineW
•How does that service work exactly? I'm in a similar situation but with a 403b from my teaching job and now have access to a 401k. Does it just give general info or does it actually look at your specific situation?
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Annabel Kimball
•Did you have to talk to someone on the phone or was it all automated? I hate having to explain my situation to a new person every time.
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Maxwell St. Laurent
•It's completely automated - you upload your documents and the AI analyzes them. It gave me specific guidance based on my exact accounts and contribution history, not just generic advice. No phone calls needed! Everything happens through their secure platform. I just uploaded my 457b statement and 401k enrollment info, asked my questions, and got detailed answers specific to my situation within minutes.
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PaulineW
Just wanted to update after trying taxr.ai based on the recommendation above. It was actually really helpful! I uploaded my 403b and 401k documents and got clear answers about how the separate contribution limits work. Apparently the 403b and 401k share the same limit (unlike the 457b which is separate), but the system explained exactly how much I could still contribute this year. Worth checking out if you're confused about retirement account limits!
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Chris Elmeda
I dealt with something similar when I left my government job. I spent WEEKS trying to get someone at the IRS to confirm the contribution limits between my 457b and new 401k. Couldn't get through on the phone, and the wait times were ridiculous. Finally used https://claimyr.com to get a callback from the IRS within about 2 hours instead of waiting on hold forever. They have this cool service where you can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and then call you when an IRS agent is available. The agent confirmed exactly what others have said - 457b and 401k have completely separate limits!
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Jean Claude
•Wait, how does this actually work? They just wait on hold instead of you? Do they record the call or something?
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Charity Cohan
•That sounds sketchy... why would I trust some random service to handle my IRS call? Couldn't they just scam people by pretending to connect them to the IRS?
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Chris Elmeda
•They don't record the call or stay on the line. The system just monitors the hold music and when a real person answers, it connects you directly. You're the only one who talks to the IRS agent. No way it's a scam - they don't ask for any personal info beyond your phone number to call you back. They're just solving the ridiculous hold time problem. When they call you, you're connected directly to an actual IRS agent. I was skeptical too until I tried it.
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Charity Cohan
Well I feel stupid now. Just tried Claimyr because I was desperate to talk to someone at the IRS about my retirement accounts. Got a callback in less than 90 minutes when I had previously spent 3+ hours on hold and got disconnected twice. The IRS rep confirmed everything about the 457b/401k separate limits and also helped clear up another issue I had with my withholding. Definitely using this again next time I need to reach them.
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Josef Tearle
Something not mentioned yet is that you need to be careful about the employer match with your new 401k. Make sure you contribute enough throughout the year to get the full match. Some employers require contributions to be spread out to get the full match (like if they match 5% per paycheck). If you wait until next year, you're definitely leaving free money on the table for this year.
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Cedric Chung
•Good point! I hadn't even considered that. The HR person said they match 50% up to 6% of salary. So I should probably start contributing now to get at least some match for the remainder of the year, right?
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Josef Tearle
•Yes, absolutely start now! If they match 50% up to 6%, you should contribute at least 6% of your salary to get the full match. That's an immediate 50% return on your money, which you can't beat anywhere else. If you wait until January, you'll miss out on all the matching funds they would have contributed for the rest of this year. Even if it's only for a few months, that's still free money you'd be leaving behind.
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Shelby Bauman
Don't forget to consider your tax situation too! Since you're contributing to a traditional 401k (I assume), those contributions will reduce your taxable income for this year. If you're in a higher tax bracket this year due to your full-time job earlier in the year + retirement payouts, it might be more beneficial to contribute now rather than waiting until next year when your income might be lower.
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Cedric Chung
•That's a great point I hadn't considered! My income is definitely higher this year because I was working full-time for half the year plus got those leave payouts. Next year I'll only have this part-time income which will be much lower. So it probably makes more sense tax-wise to put money in now?
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Shelby Bauman
•Exactly! Contributing to your 401k now will lower your taxable income for this year, when you're likely in a higher tax bracket. For example, if you're in the 24% bracket this year but might drop to the 12% bracket next year with only part-time income, every dollar you contribute now saves you 24 cents in taxes versus 12 cents next year. It's basically an extra 12% return on your money just from the tax advantage, on top of the employer match. Definitely take advantage of that while you can!
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Dmitry Sokolov
This is such a common confusion for people transitioning from government jobs! I went through the same thing when I retired from my federal position. The key thing to remember is that 457b plans are unique in that they have completely separate contribution limits from 401k/403b plans. One thing I'd add to the great advice already given - since you're only working part-time now, make sure your new employer allows you to contribute a high enough percentage to actually reach those limits. Some payroll systems have maximum percentage caps that might prevent you from contributing as much as you want with a smaller paycheck. Also, don't forget that your 457b might still be available for contributions if your former employer allows it (some do for a period after separation). But honestly, with the employer match available in your new 401k, definitely prioritize that first - it's free money that you can't get anywhere else!
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