Can a 457 Be Rolled Into an IRA? Plan Types, Options, and Taxes

Yes, a 457 can be rolled into an IRA, but only if it is a governmental 457(b) plan. Funds from a governmental 457(b) — the kind offered by state and local government employers such as school districts, fire departments, and municipal offices — can move into a traditional IRA tax-deferred, or into a Roth IRA as a taxable conversion. A non-governmental 457(b), the type offered by nonprofits and hospitals to select executives, cannot be rolled into an IRA at all. Attempting that transfer turns the entire balance into a taxable distribution.¹

Which Type of 457 Plan You Have

The plan type is the first thing to confirm, because it controls every option that follows. Governmental 457(b) plans follow the portability rules that also cover 401(k) and 403(b) accounts, so rollovers to IRAs and other eligible retirement plans are permitted.²³

Non-governmental 457(b) plans, sometimes called top-hat plans, work differently. Distributions from these plans are either paid out to you as taxable income or left in the plan. There is no rollover path to an IRA, a 401(k), or any other retirement account.⁴

Check your enrollment paperwork or ask your plan administrator if you are not sure. The rest of this article assumes a governmental 457(b).

When You Can Roll Over the Balance

You cannot roll over your 457(b) whenever you like. A distributable event has to occur first. The most common triggers are:

Separation from service by resignation, retirement, or termination.
Reaching age 59½ while still employed, if the plan permits in-service distributions.⁴
An unforeseeable emergency, such as a severe illness, casualty loss, or imminent foreclosure, limited to the amount needed to cover the hardship.⁵
Termination of the plan by the employer.
A small account balance of $5,000 or less, which the plan may cash out.⁴

Buying a home and paying college tuition do not qualify as unforeseeable emergencies.⁵

Where the Money Can Go

An IRA is one of several eligible destinations for a governmental 457(b) rollover. The IRS rollover chart also allows transfers to:

A Roth IRA, with the rolled amount counted as taxable income for the year.
A SEP-IRA.
A SIMPLE IRA, if the SIMPLE IRA has been open for at least two years.
Another governmental 457(b) plan.
A 401(k) or other qualified plan.
A 403(b) plan.
A designated Roth account inside a 401(k), 403(b), or 457(b).⁶

Not every plan accepts incoming rollovers, so confirm with the receiving institution first.

The Early Withdrawal Trade-Off

This is the point most people miss. While your money sits inside a governmental 457(b), distributions are not subject to the 10 percent early withdrawal penalty, even if you take them before age 59½. Penalty-free access is one of the strongest features of a 457(b) compared with a 401(k) or 403(b).⁷

Move those dollars into a traditional IRA and that feature is gone. Withdrawals before 59½ get hit with the 10 percent additional tax unless a narrow IRA exception applies. IRA exceptions cover disability, certain medical expenses, qualified higher education costs, and up to $10,000 for a first-time home purchase. The broad separation-from-service exception that a 457(b) offers does not exist for IRAs.⁷

If you are under 59½ and might need this money before then, leaving some or all of the balance in the 457(b) preserves that penalty-free access. Rolling to another governmental 457(b) preserves it too.

Rolling Into a Roth IRA

You can send governmental 457(b) money directly to a Roth IRA, but the full pre-tax amount becomes taxable income in the year of the conversion.⁶ Rolling $100,000 pre-tax into a Roth adds $100,000 to that year’s gross income, which can push you into a higher bracket.

The payoff comes later. Once the money has been in the Roth IRA for five years and you have reached age 59½, qualified withdrawals — including all investment growth — are tax-free. A Roth conversion tends to make sense when you expect higher tax rates in retirement or when a low-income year opens up bracket space. Splitting the rollover across two tax years, with part going to a traditional IRA and part to a Roth, is one way to soften the tax hit.

Direct vs. Indirect Rollovers

How the money moves matters as much as where it goes.

Direct Rollover

In a direct rollover, your plan administrator sends the money straight to your IRA custodian. Nothing passes through your hands, nothing is withheld, and the full balance keeps its tax-deferred status. Federal regulations exempt direct rollovers from the 20 percent mandatory withholding that applies to other distributions.⁸

Indirect Rollover

In an indirect rollover, the plan pays the distribution to you and withholds 20 percent for federal income tax.⁸ You then have 60 days to deposit the full original amount into your IRA, including the withheld portion.²

Here is where indirect rollovers go wrong. On a $50,000 distribution, the plan withholds $10,000 and hands you $40,000. To complete a tax-free rollover, you need to deposit $50,000 into the IRA within 60 days, using $10,000 of your own money to replace the withheld amount. You get that $10,000 back later as a tax refund when you file. Deposit only the $40,000 and the remaining $10,000 becomes a taxable distribution, plus a possible 10 percent penalty if you are under 59½.

The IRS can waive the 60-day deadline for casualty, disaster, or other circumstances beyond your control, but you have to request the waiver.² The one-rollover-per-year rule for IRA-to-IRA transfers does not apply to plan-to-IRA rollovers, so it will not block your 457(b) move.⁹

How to Complete the Rollover

Before the plan releases any money, you should receive a written 402(f) notice from the administrator explaining your rollover options, the tax consequences of each, and the 20 percent withholding rules. Read it. It reflects your specific plan’s terms.

From there, the process usually runs:

Open the receiving IRA if you do not have one, and gather the account number and the custodian’s mailing or wiring instructions.
Request a distribution election form from your plan administrator or HR department. You will provide the IRA account number, custodian name, delivery instructions, and whether you want a direct or indirect rollover.
Submit the form through the plan’s portal or by certified mail. Verification and processing generally take five to ten business days.
The plan liquidates your investments to cash and sends the funds to your IRA custodian. When a check is issued, it is made payable to the IRA custodian for the benefit of your account.
Confirm receipt in the IRA. Wires typically arrive within three to five business days; mailed checks take longer.

A rollover does not count against your annual IRA contribution limit, so you can move any amount regardless of that cap.¹⁰

Inherited Accounts and Divorce

Spouses and Non-Spouse Beneficiaries

A surviving spouse who is the sole beneficiary of the 457(b) can roll the inherited balance into their own IRA and treat it as their own account under normal IRA rules.¹¹

Non-spouse beneficiaries such as children cannot roll the funds into their own IRA. They generally have to distribute the entire inherited balance within 10 years of the account holder’s death. Certain eligible designated beneficiaries — minor children, disabled individuals, and people not more than 10 years younger than the deceased — may qualify for a longer life-expectancy payout.¹¹

Divorce

A qualified domestic relations order (QDRO) can direct the plan to pay a share of the 457(b) to a former spouse. A former spouse receiving funds through a QDRO can roll them into their own IRA tax-free, as though they were the original participant. If the QDRO directs payment to a child or other dependent, the distribution is taxed to the plan participant.¹²

Reporting the Rollover

The plan administrator reports the distribution on Form 1099-R, which arrives by the end of January following the rollover year.¹³ The form shows the total distributed, any tax withheld, and a distribution code identifying the type of rollover.

You still report the transaction on your federal return even when no tax is due on a properly completed direct rollover. For an indirect rollover, you report the distribution and the amount redeposited on the same return, with the taxable portion showing as zero if you replaced everything within 60 days. Any shortfall becomes taxable income. Keep account statements from both the 457(b) and the IRA for at least three years.

Required Minimum Distributions After the Move

RMDs kick in whether the money stays in the 457(b) or lands in an IRA. If you were born between 1951 and 1959, your start age is 73. If you were born in 1960 or later, it is 75. Your first RMD is due by April 1 of the year after you reach the applicable age, and later ones are due by December 31 each year.¹⁴

One planning wrinkle: if you are still working for the governmental employer that sponsors your 457(b), the plan may let you delay RMDs until you actually retire. That still-working exception disappears once the balance moves to an IRA, where RMDs run on age alone.¹⁴

1
Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans
2
Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
3
Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations
4
Internal Revenue Service. Comparison of Tax-Exempt 457(b) Plans and Governmental 457(b) Plans
5
eCFR. 26 CFR 1.457-6 – Timing of Distributions Under Eligible Plans
6
Internal Revenue Service. Rollover Chart
7
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
8
eCFR. 26 CFR 1.401(a)(31)-1 – Requirement to Offer Direct Rollover of Eligible Rollover Distributions
9
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
10
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
11
Internal Revenue Service. Retirement Topics – Beneficiary
12
Internal Revenue Service. QDRO – Qualified Domestic Relations Order
13
Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
14
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)