Can I Transfer My 457 to a Roth IRA?

Can I transfer my 457 to a Roth IRA

Answering this question depends on several variables. First, it’s important to understand how a 457 plan operates – typically offered by government employers as nonqualified retirement plans with contributions tax-deferred until withdrawal.

However, unlike with a 401(k), withdrawals from 457 plans don’t incur an early withdrawal penalty.


Dependent upon the account it’s transferred into, transferring a 457(b) into an IRA could either be tax-free or subject to penalties if done within 60 days. Consolidation could occur and potentially allow access to more investments but paying taxes could become necessary if move takes longer.

Roth 457(b) contributions are deducted from employees’ paychecks after-tax, so they do not reduce gross taxable income. Workers over 50 can make additional catch-up contributions (known as three-year catch-up contributions) of up to $7,500 annually in addition to the plan’s maximum contribution limit of $22,500.

Withdrawals from traditional pension plans are usually permitted only upon leaving service or reaching age 591/2; at that point, withdrawals will be taxed at ordinary income tax rates. Roth IRAs do not have required minimum distributions that could make this investment choice attractive to those nearing retirement.

Required Minimum Distributions (RMDs)

As part of your retirement strategy, it’s vital that you understand required minimum distributions (RMDs). RMDs are withdrawals that the IRS mandates you take each year from tax-deferred accounts such as Roth accounts.

RMDs are calculated by dividing your account balance as of December 31 of the previous year by a life expectancy factor, such as that outlined by the IRS in Publication 590-B: Distributions from Individual Retirement Arrangements. You can utilize either the IRS Uniform Table or Joint Life and Last Survivor Expectancy Table when making this calculation.

Your RMD must begin being taken by April 1 of the year following your 73rd birthday (or 72nd birthday if reached later than 2023). Failing to withdraw RMD on time could incur a severe tax penalty.

An alternative strategy would be to convert some or all of your tax-deferred accounts to Roth IRAs; this could help lower overall account balances, and therefore RMDs, while providing your estate with tax-free assets.


A 457 plan is a tax-advantaged retirement savings account available to government employees and certain workers at nonprofit organizations. Funds placed into such accounts do not incur taxes until they are withdrawn from them and spent.

Roth 457(b) contributions are after-tax salary reduction contributions that can be withdrawn without penalty when the account holder reaches age 59 1/2, similar to rolled over Roth contributions from other plans or IRAs.

Traditional (pretax) 457(b) withdrawals are subject to normal income taxes and the 10% early withdrawal penalty if taken prior to age 59 1/2; however, an exception exists if still employed and withdrawing money due to job severance or an unforeseeable emergency. For this reason, many retirees opt to move their 457(b) plan funds into an IRA in order to avoid both penalties and taxes; additionally IRAs typically offer greater flexibility and investment options than 457(b) plans.


Converting from a 457 plan to an IRA can provide greater investment flexibility and potential tax benefits, but it is essential to fully understand the process, rules, and implications prior to making this decision. A financial professional can assist with this assessment process to find an optimal solution tailored to your circumstances and advise accordingly.

Rolling over your retirement funds may take some time depending on how your former employer processes things, but once distributed they must be deposited within 60 days into an IRA or else they’ll be considered an actual distribution, subject to taxes and penalties.

If your governmental 457 plan allows direct rollovers into an IRA, any distributions made would not count towards your income and would avoid the 10% early withdrawal penalty. Furthermore, such funds wouldn’t count towards annual contribution limits; but they could still be invested tax-deferred.

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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