Can 457 Plans Be Rolled Over to an IRA?

Can 457 plans be rolled over to an IRA

Both 457 plans and IRAs may share many similarities, yet their rollover dynamics contain subtle distinctions. A 457 plan may have restrictions that prevent withdrawals without penalty after separation from employment while an IRA allows distributions without incurring fees.

Transitioning a 457 plan into an IRA may provide numerous advantages, including consolidating retirement savings and accessing more investment options. This article will detail key points when exploring this path.


Participants retiring from a 457 plan or leaving companies offering them can transfer their assets into most retirement accounts, including traditional and Roth IRAs. Another governmental 457 plan may also offer similar options but with lower account limits than most alternatives.

Governmental 457 plans allow employees to save pretax money in an IRA and withdraw it tax-free at retirement. If funds are withdrawn early under non-qualifying circumstances (for instance severe financial hardship or unexpected emergencies) however they will become taxable and must be reported accordingly.

Some governmental 457 plan providers offer investment choices within their plans, yet can encumber costly fees that diminish investor returns – brokerage, advisor and record-keeping fees being among them. Some participants elect to roll their assets over into an Individual Retirement Account instead, which often has lower fees while being more accessible when needed.


457 plans stand out as the only non-qualified group retirement plans that do not mandate minimum contributions, providing participants with some unique features. Starting in 2023, participants in government plans can remit up to either $18,000 or the standard annual limit (whichever is greater), while those age 50+ may also be eligible for catch-up contributions of $6,000.

An additional advantage of 457 plans is their tax-deferred nature, as they allow you access funds without penalty after leaving employment and before age 59.5 – unlike traditional retirement accounts such as 401(k)s or 403(b)s that typically incur early withdrawal penalties unless there are extenuating circumstances.

Whoever opts to rollover their 457 plans into an IRA may incur regular income taxes; however, doing so can offer wider investment choices, asset consolidation benefits, potential savings on management fees and increased withdrawal flexibility – not to mention staying on track with long-term retirement goals.


Consolidating retirement assets into an IRA provides several advantages: more control, reduced expenses and expert guidance tailored specifically to individual needs. Furthermore, an IRA may help avoid higher fees associated with some 457 plans, such as those associated with on-site retirement education representatives.

If you decide to rollover your funds, it is advisable to do it via direct transfer in order to prevent any possible tax complications that might arise if money was first distributed directly to you before being transferred back into an IRA account.

As nonqualified accounts like 457 plans do not adhere to the same distribution and withdrawal regulations as qualified ones like 401(k)s or 403(b), they can present unexpected tax implications if you withdraw funds prior to separation from employment, as the IRS could assess a 10% early withdrawal penalty; this penalty does not apply when rolling over into an IRA rollover plan.

Investment Options

As your funds roll over, the potential investment options become vaster. Now is an opportune moment to reevaluate asset allocation; diversification remains key in mitigating risk. Perhaps moving into sectors not covered in your previous plan or exploring alternative investments may provide new investment possibilities.

One important factor when selecting your 457 plan is finding an advisor familiar with its specifics. While this might not be essential for private sector workers, government and non-government employees should prioritize this when finding advisors to assist.

Rolling over a 457 can take some time; once the distribution request form has been filled out and submitted, money disbursal can take weeks or months depending on your tax bracket. When your funds arrive, select an IRA provider with target-date funds that automatically adjust as retirement nears – this way your money won’t disappear before its time!

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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