Deferred Compensation — 457(b) and 403(b) accounts, coordinated with the pension.
Most of our clients have been quietly funding deferred comp accounts for years without a real plan for them. We help you coordinate them with the pension and make good decisions at retirement.
What deferred compensation is for Florida public employees
For most Florida public employees, retirement income starts with the Florida Retirement System — either the FRS Pension Plan (a defined-benefit pension) or the FRS Investment Plan (a defined-contribution account). Deferred compensation is the layer you build on top of that foundation: money you set aside, pre-tax or Roth, in a 457(b) or 403(b) to supplement what the pension provides. It is voluntary, self-directed, and entirely yours to coordinate with the rest of your plan.
If you work for the State of Florida, a county, or many municipalities, you likely have access to a 457(b) — often the State of Florida Deferred Compensation Plan. If you teach or work for a school district, you may also have a 403(b). These accounts are easy to enroll in and easy to forget about, which is exactly why so many of them drift for years without a real plan behind them.
457(b) vs. 403(b): how they differ
Both are tax-advantaged retirement accounts, but the rules differ in ways that matter at retirement. A key distinction is the early-withdrawal treatment. A governmental 457(b) generally allows penalty-free withdrawals once you separate from service, even before age 59½ — a meaningful feature if you retire early, as many first responders and law enforcement officers in the Special Risk Class do. A 403(b), by contrast, generally follows the same 10% early-withdrawal penalty rules as a 401(k) before 59½.
Many Florida educators are eligible for both a 457(b) and a 403(b), and the contribution limits are generally tracked separately — so it can be possible to fund both in the same year. The trade-off is usually fund selection and cost: 457(b) and 403(b) menus vary widely by provider, and the differences in fees and investment quality can be significant. We help teachers and state and county employees compare the plans they actually have access to.
Contribution limits, catch-up, and Roth vs. pre-tax
The IRS sets an annual elective deferral limit that is adjusted periodically for inflation, plus an additional catch-up amount once you reach age 50. The 457(b) also offers a special pre-retirement catch-up provision in the years approaching your plan's normal retirement age, which can allow larger contributions to make up for earlier years. Because these figures change from year to year, it's worth confirming the current limits with your plan administrator or the IRS before you set your deferral.
Choosing between Roth and pre-tax
Pre-tax contributions lower your taxable income today and are taxed when you withdraw them in retirement. Roth contributions are made with after-tax dollars now and generally come out tax-free later. The right mix often comes down to whether you expect your tax rate to be higher during your working years or in retirement. Because an FRS pension delivers taxable income for life, holding at least some Roth money can give you a tax-free source to draw on in higher-income years. There is rarely a single correct answer — it depends on your bracket, your pension, and your timeline.
Allocation, fees, and the accounts no one reviews
Inside a 457(b) or 403(b) plan, the investment options range from target-date funds to individual fund choices. We help you build an allocation that fits your timeline, your risk comfort, and the rest of your retirement picture — not just what the default enrollment suggestion says.
The quiet problem with these accounts is neglect. A common pattern: an employee enrolls once early in their career, accepts the default investment, and never looks again. Over twenty or thirty years that can leave an allocation that no longer matches your timeline, fund fees that are higher than necessary, or beneficiary designations that are out of date. Small differences in cost compound — a fund charging a fraction of a percent more each year can meaningfully reduce what you keep over a long career. A periodic review of allocation, internal fees, and beneficiaries is often the simplest high-value step available.
We also look at old 403(b) or 457(b) accounts from prior employers or school districts that may have been left behind. Consolidating or rolling those over often makes sense — but it depends on plan rules, potential surrender charges, and your specific situation, so it deserves a deliberate decision rather than a default one.
At retirement — distribution sequence and rollovers
When you retire, deferred comp accounts become a major part of your income picture — often alongside a meaningful FRS pension. The sequence in which you draw from different accounts has real tax implications. Drawing heavily from tax-deferred accounts while your pension is already providing income can quietly push you into a higher bracket for years.
At separation you generally have a few paths: leave the money in the plan, roll it to an IRA, or begin taking distributions. Each has trade-offs around investment options, fees, creditor protection, and flexibility — and rolling a penalty-friendly 457(b) into an IRA can change the early-withdrawal rules, so the timing matters. We help you think through when to start drawing from deferred comp and how to sequence it with the pension and Social Security as part of a broader retirement income plan.
The Roth conversion window
After you stop working but before required minimum distributions and Social Security fully ramp up, you may have several relatively low-income years. Converting some pre-tax money to Roth during that window can spread the tax over time and reduce the size of future RMDs. Whether it helps depends on your bracket, your pension, and your overall plan — so it's best modeled carefully, in coordination with your CPA or tax advisor, rather than done reflexively.
Required minimum distributions
Starting at age 73, the IRS generally requires minimum annual distributions from traditional tax-deferred accounts. With a pension already providing income, RMD planning becomes particularly important — the wrong approach can create unnecessary tax exposure late in retirement. We look at your projected RMD timeline alongside your pension, Social Security, and other income sources so you're not surprised by the tax bill when RMDs begin.
None of this is one-size-fits-all, and none of it is individualized advice until we've sat down together. This page is educational. Benowitz Wealth Management is the public brand of Joy Financial Group LLC, a fee-only Florida fiduciary, and we are not affiliated with or endorsed by the Florida Retirement System or the State of Florida. We work alongside your CPA or tax advisor, and we encourage members to confirm current plan specifics with their plan administrator or MyFRS.gov. To see how deferred comp fits the bigger picture, our FRS retirement planning overview is a good next read.
The 457(b) and 403(b) you've been quietly funding deserve a real plan. Let's build one.
Schedule a Conversation →Deferred compensation questions Florida public employees ask
Both are tax-advantaged retirement accounts offered to public employees, but they follow different rules. A 457(b) — such as the State of Florida Deferred Compensation Plan — generally lets you take withdrawals after you separate from service without the 10% early-withdrawal penalty, even before age 59 and a half. A 403(b), common for teachers and school district staff, follows penalty rules closer to a 401(k). Many Florida public employees are eligible for both, and the two can be funded in the same year.
Pre-tax contributions lower your taxable income today and are taxed when you withdraw them; Roth contributions are made with after-tax dollars and generally come out tax-free in retirement. The right mix often depends on whether you expect your tax rate to be higher now or later. Because an FRS pension provides taxable income in retirement, having some Roth money can add flexibility. This is general education, not individualized tax advice — confirm specifics with your CPA.
Your FRS Pension Plan or Investment Plan typically forms the foundation of your retirement income, and deferred comp accounts sit on top as a flexible, self-directed layer. Because the pension may already provide steady taxable income, the order in which you draw from deferred comp accounts affects your tax bracket. Coordinating the two — rather than treating deferred comp as a separate bucket — is where much of the planning value lives.
Many employees enroll once, accept a default investment, and never revisit it. Over a long career that can mean an allocation that no longer fits your timeline, higher fund fees than necessary, or old accounts from prior districts left behind. A periodic review of allocation, fees, and beneficiary designations can help keep these accounts aligned with the rest of your plan.
The IRS sets an annual elective deferral limit that is adjusted periodically, with an additional catch-up amount once you reach age 50. The 457(b) also has a special pre-retirement catch-up in the final years before your plan's normal retirement age that may let you contribute more. Because these figures change, confirm the current limits with your plan administrator or the IRS before maximizing contributions.
After you stop working but before required minimum distributions and Social Security fully ramp up, you may have a stretch of relatively low-income years. Converting some pre-tax money to Roth during that window can spread the tax over time and reduce future RMDs. Whether it makes sense depends on your bracket, the pension, and your broader plan, so it is best modeled with your tax advisor.
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