In this DC Update, I’m going to answer a very common question we receive from state employees. That question is, “what’s the difference between the MO Deferred Comp 457(b) Plan and an IRA?” Just to be clear, IRAs and the MO Deferred Comp 457(b) Plan are both retirements savings accounts that can help you put away and grow money for your future, but there are several features that make them different. For example, anyone with earned income can open and contribute to an IRA. A 457(b) plan on the other hand, is a government employer-sponsored plan and is only available to employees through their employer. The MO Deferred Comp Plan is exclusively setup for state of Missouri employees and 10 universities around the state. From the education content, to the investment lineup, everything the plan does is for the best interest of state employees. Another major difference is the amount of money the IRS allows you to contribute to each plan. In 2025, deferred comp savers can contribute $23,500 to their account. In addition, there are special catch-up provisions that allow savers over age 50, between the ages of 60-63, and within 3 years of retirement to contribute even more; sometimes double the normal contribution limit. With an IRA, savers can contribute only $7,000 a year and an additional $1,000 if the saver is 50 or older. There’s also a difference when you can withdraw your retirement savings. With the MO Deferred Comp 457(b) plan, you can access your retirement savings, penalty free, at any age as long as you are separated from state employment. In a traditional IRA, you typically will not be able to withdraw your money before age 59 ½ without paying a 10% early withdrawal penalty. While the choice of which retirement savings option to use is certainly yours, please be aware of the features that differentiate these account types. For more information on the deferred compensation plan and IRAs, see the Understanding Your Retirement Savings Options flyer found on the Plan Publications page at modeferredcomp.org.
