What does a 457 Plan primarily allow participants to do?

A 457 Plan is a type of non-qualified, tax-advantaged retirement savings plan that is available for governmental and certain non-governmental employees. The primary function of a 457 Plan is to allow participants to defer a portion of their income for retirement savings without incurring current income tax on those contributions. This means that the money contributed to the plan can be invested and grow tax-deferred until it is withdrawn, typically during retirement.

This deferral of compensation is particularly advantageous because it can help reduce the participant's taxable income in the year contributions are made, allowing for greater potential growth of the savings over time. Participants only pay taxes on their withdrawals, which often occur when they are in a lower tax bracket during retirement.

While the other options may be associated with different types of plans or financial strategies, they do not accurately capture the primary function of a 457 Plan. For example, contributions to a health savings account are governed by a different set of rules and are not a feature of a 457 Plan. Similarly, while 457 Plans may allow for certain penalty-free withdrawals under specific circumstances (like an emergency), this is not their main purpose. The opportunity to invest in real estate can also be available in other investment vehicles but is not