Yes, you can withdraw from a 457(b) while still employed, but only through specific channels that federal law and your plan document allow: an unforeseeable emergency distribution, an age-based in-service withdrawal, a small-balance cashout, a plan loan, or one of the newer SECURE 2.0 distribution types. Which of these is actually available to you depends on whether your plan is governmental or non-governmental, your age, your account balance, and whether your employer adopted the optional provisions in its plan document.
First, Know Which Type of 457(b) You Have
The rules split sharply between governmental and non-governmental plans, and every option below assumes a governmental plan unless noted. If your employer is a state or local government agency, you have a governmental 457(b). If your employer is a tax-exempt nonprofit like a hospital or charity, you have a non-governmental 457(b).
Non-governmental plan assets remain the property of your employer and are exposed to its general creditors in bankruptcy or litigation.1Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans Non-governmental participants also cannot take age-based in-service distributions until 70½ rather than 59½, are not eligible for the qualified birth or adoption distribution, and are shut out of several other SECURE 2.0 provisions.
Unforeseeable Emergency Distributions
This is the most common in-service withdrawal, and the bar is high. Federal regulations limit it to severe financial hardship caused by illness or accident affecting you, your spouse, or a dependent; sudden property loss from an event like a natural disaster not covered by insurance; or other extraordinary circumstances genuinely beyond your control.2Internal Revenue Service. Retirement Plans FAQs Regarding Hardship Distributions
Buying a house does not qualify. Paying off credit cards does not qualify. Neither does any hardship you could resolve by cashing in other assets, tapping insurance proceeds, or stopping your plan contributions. Your administrator will require documentation—medical bills, repair estimates, foreclosure notices—showing the need is real and that other resources have been exhausted.
The amount cannot exceed what is reasonably necessary to cover the emergency, including taxes owed on the distribution itself. Since 2020, your plan can no longer force you to suspend future contributions as a condition of receiving the distribution.3Federal Register. Hardship Distributions of Elective Contributions, Qualified Matching Contributions, Qualified Nonelective Contributions, and Earnings Under the old rules, a hardship withdrawal could shut off your deferrals for six months, costing you employer matches and tax deferral. That requirement is gone.
Age-Based In-Service Withdrawals
Once you hit certain age milestones, you can take distributions without proving any hardship. For governmental 457(b) plans, federal law permits in-service withdrawals starting at age 59½.4Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations For non-governmental plans, the statutory age is 70½.1Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans
Federal permission is not the same as plan permission. Some plan documents still restrict distributions until separation from service regardless of age. Check your summary plan description or ask your administrator to confirm the provision has been adopted.
Small-Balance (De Minimis) Cashouts
If your account has dwindled to a small balance you are no longer building, you may be able to cash it out entirely. Federal rules allow a one-time de minimis distribution when all three conditions are met:
- Your total 457(b) balance, deferrals plus earnings, is $5,000 or less.
- You have made no deferrals to the plan during the two-year period ending on the distribution date.
- You have not previously received a de minimis distribution from the plan.
If your employer maintains more than one 457(b) plan, all of them are treated as a single plan for this rule, so splitting accounts will not help you clear the $5,000 threshold.4Office of the Law Revision Counsel. 26 USC 457 – Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations Not every plan offers this provision. Some plans that do will auto-distribute small balances without a participant request.
457(b) Plan Loans
A loan is not technically a withdrawal, but it is often the most practical way to reach your 457(b) money while employed. You borrow from yourself and repay the balance, with interest, into your own account. Federal law permits 457(b) loans, though your employer is not required to offer them.5Internal Revenue Service. Retirement Topics – Loans
If loans are available, the maximum is the lesser of $50,000 or 50% of your vested balance. Repayment is generally through at least quarterly payments over five years, usually handled by automatic payroll deduction. Loans used to buy a primary residence can stretch significantly longer, with some plans allowing up to 30 years.5Internal Revenue Service. Retirement Topics – Loans Interest rates must be reasonable, which the IRS has informally pegged at around the prime rate plus 2%. The interest goes back into your account, not to a lender.
The real risk is default. If you miss payments, or leave your job with an outstanding balance that must be repaid immediately, the remaining amount becomes a taxable distribution. You will owe income tax on the full outstanding balance, and potentially the 10% early withdrawal penalty if the loan included funds rolled in from another plan type.6Internal Revenue Service. Plan Loan Offsets For a loan offset caused by leaving your job (a qualified plan loan offset), you have until your tax filing deadline for that year, including extensions, to roll the offset amount into another eligible retirement plan.
SECURE 2.0 Distribution Options
Recent legislation opened several new in-service routes, and governmental 457(b) plans are eligible for most of them. Every one of these is optional. Your plan must adopt the provision before you can use it.
Emergency Personal Expense Distributions
Starting in 2024, governmental 457(b) plans can permit a distribution of up to $1,000 per calendar year, or your vested balance above $1,000 if less, for unforeseeable or immediate personal or family financial needs.7Internal Revenue Service. Notice 2024-55 – Certain Exceptions to the 10 Percent Additional Tax You self-certify the need, and the plan cannot demand additional documentation. Repayment within three years is allowed but not required. You cannot take another emergency personal expense distribution until you have repaid a prior one or three years have passed.
Qualified Birth or Adoption Distributions
Governmental 457(b) participants can withdraw up to $5,000 within one year of a child’s birth or legal adoption. The limit applies per event, so each qualifying birth or adoption creates a fresh $5,000 opportunity. You have three years from the day after receiving the distribution to repay it into an eligible retirement plan. Non-governmental 457(b) plans are not eligible.
Terminal Illness Distributions
If a physician certifies in writing that you have a terminal condition with a life expectancy of 84 months or less, you can take penalty-free distributions from a governmental 457(b) regardless of your age or employment status. The written certification must be in hand before you take the withdrawal. Repayment within three years is allowed if your health improves.
Taxes on In-Service Withdrawals
Governmental 457(b) plans have a real tax advantage over 401(k)s and 403(b)s: distributions are not subject to the 10% early withdrawal penalty, regardless of your age.8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Take an emergency distribution at 35 and you will owe ordinary income tax, but no penalty.
One exception matters. Money you rolled into your 457(b) from a 401(k), 403(b), or IRA does carry the 10% penalty if distributed before 59½.8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Many plans track rollover money separately for this reason. If you have consolidated old accounts into your 457(b), confirm with your administrator whether those funds are segregated before requesting a distribution.
For withholding, expect 20% taken upfront on any distribution that qualifies as an eligible rollover distribution. For distributions that do not qualify for rollover, such as hardship withdrawals, the default withholding rate is 10%.9Internal Revenue Service. Eligible Deferred Compensation Plans Under Section 457 – Notice 2003-20 Withholding is only a prepayment; your actual tax bill depends on your total income for the year.
If your plan offers Roth 457(b) contributions, the earnings portion of a Roth distribution is tax-free only if you have held the Roth account for at least five tax years and you are at least 59½, disabled, or the distribution is paid due to death.10Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts Fail either test and your original Roth contributions still come out tax-free, but the earnings portion is taxable.
How to Request the Distribution
Start with your plan administrator, either your employer’s HR office or the third-party recordkeeper. Each distribution type has its own form and its own documentation requirements: an unforeseeable emergency request is not the same paperwork as an age-based withdrawal or a loan application. Attach supporting documentation with the initial submission rather than waiting to be asked; incomplete applications are the most common cause of delay.
Review generally takes three to ten business days, longer for emergency requests because the administrator must verify that the situation meets the federal standard. Once approved, funds typically arrive within a few business days by direct deposit or mailed check, and some plans charge a processing fee in the range of $25 to $75.
Before pulling money out, run the numbers on a plan loan first if you have a short-term need. A loan repaid on schedule avoids the tax hit entirely, and the interest goes back into your own account. An outright distribution shrinks your retirement balance for good, unless you use one of the SECURE 2.0 options that permit repayment.