Can I Transfer a 457b to an IRA?

Depending on your employer, if you work for either the government or an exempt nonprofit organization, a 457b plan could be available to you. These plans operate similarly to 401(k) plans in that they allow employees to invest pretax portions of their salaries before taxation; some even allow “catch-up” contributions closer to retirement age.

Before the Economic Growth and Tax Relief Reconciliation Act of 2001 was signed into law, government plans were more restrictive when it came to moving funds between savings accounts.

Transferring a 457b to an IRA

IRAs may provide tax savings and asset protection for doctors with 457(b) accounts, typically offering lower tax rates than traditional accounts or 401(k)s. But make sure you understand their restrictions and fees prior to making any decisions – government 457(b) plans will likely remain safe from creditors, while non-government ones could potentially become vulnerable against claims from creditors of employers who use non-governmental accounts.

Public employees often have the choice between 403(b) and 457(b) plans, with many employers matching employee contributions voluntarily to these retirement accounts. Withdrawals from 457(b) accounts without penalty can also be completed within 60 days via transfer to another retirement account known as a rollover process.


A 457(b) deferred compensation plan is an employer-sponsored retirement savings plan that allows employees to save a portion of their current compensation at tax advantaged rates, often used as a supplement to pension plans and Social Security benefits. Employees can make additional contributions up to twice the annual contribution limit during the three years leading up to retirement; these contributions must meet twice this limit before becoming capped out. In addition, this type of plan offers limited investment choices such as annuities and mutual funds and does not allow direct rollovers between different plan types like switching over from an 401(k) into an IRA etc.

457(b) accounts stand out from other retirement savings accounts by permitting participants to make penalty-free withdrawals prior to age 59 1/2, but only after having separated from service as the account does not fall under ERISA regulation like its counterpart 401(k). If you’re leaving your current employer’s plan and considering rolling it over into an IRA instead, this could open up access to more investments while simplifying tracking your account.


Since 457(b) plans differ significantly from 401(k) and 403(b) accounts, it is vital that one thoroughly considers all possible accounts before selecting one.

Government 457(b) plans are held in trust and can be easily transferred into other retirement savings accounts, while non-governmental 457(b) plans belong solely to your employer and cannot be transferred (though some employers allow employees to transfer funds). Therefore, your money could be at risk in case your employer declares bankruptcy – making you vulnerable when dealing with bankruptcy proceedings.

457(b) plans also allow early withdrawals without incurring penalties; however, their distribution will be subject to income taxes and an additional 10% surtax if taken prior to age 59.5. This option could be useful if you need access to funds quickly but can afford the additional tax liability; however withdrawals could become taxable in case of severe financial distress.

Taking a distribution

457b plans are defined contribution retirement accounts offered by state and local government agencies as well as some nonprofit organizations, similar to 401(k) plans but providing greater flexibility with withdrawals and investment options. Assets within these plans accumulate tax-deferred until their withdrawal by employees at retirement time.

Non-governmental 457b plans allow penalty-free early distributions before age 59 1/2; however, such withdrawals could increase your taxable income significantly and push you into higher tax brackets.

Small plans of 457b plans can be costly due to providers having to bring on-site education representatives in to enroll employees – which increases costs for employers as well as employees working for small companies. Employees working for these smaller firms might be better served with a larger plan as fees tend to be lower – for instance many employees can contribute equally between their 457b account and 403(b).

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