Understanding 457 Plan Withdrawal Age and Your Retirement Options

You can start withdrawing from your 457 plan as early as age 59 1/2, but it's essential to consider the tax implications and potential penalties for early withdrawal.

Most employers allow you to withdraw from your 457 plan once you've left their employment, but it's crucial to review your plan documents to confirm the rules.

You can't withdraw from a 457 plan while still employed, unless you're 55 or older, in which case you can take a loan or hardship withdrawal, but these options come with strict rules and penalties.

Typically, you can withdraw from a 457 plan at any age, but if you do so before age 59 1/2, you may face a 10% penalty, in addition to income tax on the withdrawal.

You can withdraw money from your 457 plan under certain circumstances.

You can withdraw money from your 457 plan in events such as death, disability, severance from employment, retirement, or if you're 59½ or older. You can also withdraw money due to unforeseeable emergencies or if your account balance is $5,000 or less with certain conditions.

Income taxes are payable upon withdrawal and federal restrictions apply to early withdrawals. Be sure to talk with your tax advisor before withdrawing any money.

The IRS requires you to take Required Minimum Distribution (RMD) withdrawals from your retirement account(s) annually beginning the year you reach the RMD eligible age, which varies based on your birthdate.

Here are the RMD eligible ages:

In general, you must begin to take withdrawals from your 457(b) no later than April 1 of the year following the year in which you turn age 73.

If you're considering a 457 plan, you'll want to know how it compares to other plans like the 403(b) SRA.

The 457 plan does not allow in-service disability or hardship withdrawals, but it does allow withdrawals at age 59½. The 403(b) SRA, on the other hand, allows in-service disability and hardship withdrawals, but it's subject to an IRS early withdrawal penalty if you're under 59½.

Here's a quick comparison of the two plans at a glance:

If you're considering a 403(b) plan for your retirement savings, it's essential to understand the key differences between the 403(b) SRA and 457(b) plans.

The 457(b) plan does not allow in-service disability or hardship withdrawals, but the 403(b) SRA plan does.

In-service withdrawals at age 59½ are allowed in both plans.

The 457(b) plan is subject to minimum distributions at age 72, just like the 403(b) SRA plan.

The 457(b) plan is exempt from the IRS early withdrawal penalty, but the 403(b) SRA plan is not.

You can take loans from both plans, but defaulting on a loan will trigger income taxes and possibly an IRS early withdrawal penalty if you're under 59½.

Here's a quick comparison of the two plans at a glance:

If you're considering multiple retirement plans, you may find that one plan is more suitable for your needs than another. You may already contribute the maximum allowable to a U-M 403(b) SRA or another retirement savings plan, and still want to save more.

You should consider the 457(b) plan if you don't need to cash out your accumulations before retirement, termination, or age 59½. This can help you avoid having to take a penalty.

If you anticipate taking a cash withdrawal before age 59½, the 457(b) plan can help you avoid the IRS 10% penalty. This can be a big relief if you're planning to retire early or face other circumstances that require an early withdrawal.

You'll want to understand the plan rules and requirements of your 457 plan to avoid any penalties or surprises. You must begin to take withdrawals from your 457(b) no later than April 1 of the year following the year in which you turn age 73, unless you're still working.

If you're still working, you can delay withdrawal from your 457(b) until April 1 following the year in which you retire. This is a one-time exception, so be sure to plan accordingly.

You'll be required to withdraw at least a minimum amount from your account each year, starting after you reach age 70 1⁄2 or separate from service, whichever is later. This is a rule set by the IRS.

There's no 10% penalty for early withdrawals, but you will owe income tax on the amount you withdraw. This is a relief for many plan holders, but keep in mind that taxes will still be due.

Here's a summary of the key withdrawal rules:

Remember, failing to take a required minimum distribution can result in a significant penalty: a 50% nondeductible excise tax on the portion not distributed (although this was reduced to 25% starting in 2023, and can be reduced to 10% if the error is corrected promptly). Be sure to plan ahead and stay on top of your withdrawals.

When you're considering a 457 plan, you'll want to think about the different plan types and options available to you. There are two main types of 457 plans: traditional and Roth.

A traditional 457 plan allows you to contribute pre-tax dollars, reducing your taxable income for the year. This can be a great option if you're in a high tax bracket and want to lower your tax liability.

You can withdraw funds from a 457 plan at any time, but you'll need to consider the potential tax implications and penalties. Some plans may also have rules about when you can take loans or withdrawals.

You can also choose to roll over your 457 plan to an IRA or another qualified plan, providing more flexibility and investment options.

There are two main types of 457 plans: 457(b) and 457(f). The 457(b) plan is the most common type and is available to all employees of a state or local government entity.

A 457(b) plan allows you to invest a portion of your salary on a pretax basis, and the money grows tax-deferred until you decide what to do with it when you retire. The assets in a 457(b) plan are held in trust and have rollover privileges similar to those of a 401(k) or 403(b).

Only certain "highly compensated employees" of non-governmental organizations can offer 457(b) plans, and the assets are not held in trust but remain with the employer until they are distributed. The rollover privileges are much more restricted in this case.

457(f) plans, on the other hand, are available only to highly compensated employees of non-governmental organizations such as charities and private nonprofits. Contributions to a 457(f) plan are virtually unlimited, but the IRS requires that the funds be at a "substantial risk of forfeiture".

Rolling over your 457(b) plan can be a smart move, especially if you're changing jobs or retiring.

The IRS has a handy rollover chart that shows which plans a 457(b) can be rolled into and under what circumstances.

If you're a plan holder, you can take distributions from your 457 plan at age 59 1/2, without penalty, just like with a traditional IRA.

As a plan holder, you have the flexibility to choose how you take your distributions, and you can even roll them over into another retirement account if you want to.

You can name beneficiaries to receive distributions from your 457 plan, which can be especially helpful if you pass away before you've had a chance to take your distributions.

If you're a 403(b) plan holder, you're in a great position to save for retirement. Some tax-exempt organizations qualify to offer both 403(b) and 457(b) plans, which can be a huge advantage.

Contributing to both plans, if you can afford to do so, will help you greatly increase your tax-advantaged retirement savings. This can make a big difference in your financial future.

Your 457(b) plan is just one type of retirement account that has specific rules for what happens after you pass away. Death benefits are paid to a beneficiary or beneficiaries on file with your vendor.

If you have a 457(b) plan, you can designate a beneficiary to receive the death benefits. You should review your beneficiary designations annually and update them as necessary through your 457(b) vendor.

The age of the plan participant and the beneficiary's relationship to you can affect how the death benefits are distributed. You should review your beneficiary designations annually and update them as necessary through your 457(b) vendor.

You can make changes to your 457 plan, but be aware that certain changes may trigger taxes and penalties.

If you're 59 1/2 or older, you can withdraw from your 457 plan without penalty.

However, if you're under 59 1/2 and withdraw from your 457 plan, you may be subject to a 10% penalty, in addition to income taxes on the withdrawal.

You can also roll over your 457 plan to an IRA, which can provide more investment options and flexibility.

It's generally recommended to avoid taking loans from your 457 plan, as this can reduce the plan's assets and potentially lead to penalties and taxes.

The age at which you can withdraw from a 457 plan varies depending on the plan type. You can typically withdraw from a traditional 457 plan at age 59 1/2, but with a 10% penalty.

You can withdraw from a Roth 457 plan at any time, tax-free and penalty-free, after you've had it for at least five years.

The withdrawal rules for a 457 plan are similar to those for a 401(k) plan.