What are the rules governing a 457 plan distribution?


Quick Answer

Owners of 457 accounts can take distributions at any age without owing an early withdrawal penalty, as long as they retire or leave their jobs, according the CDC Federal Credit Union. Account owners must pay income taxes on their distributions, and they must start taking minimum distributions by the time they reach age 70 1/2.

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Full Answer

Account owners can roll their 457 savings to a traditional or a Roth IRA, which offers several benefits, explains the credit union. The government doesn’t require Roth IRA owners to take minimum distributions at age 70 1/2, so owners have more options to leave their savings to family members. Retirees often have more than one retirement account because they worked in multiple industries, and consolidating the accounts makes it easier to manage investments and calculate minimum distribution requirements.

The Internal Revenue Service applies the same annual contribution limits to owners of 401(k), 403(b) and 457 plans, notes Forbes. The limits apply to each account an individual owns, which means that a person can contribute the annual maximum to a 457 plan and a different retirement account. All retirement account owners can make catch-up contributions once they reach age 50, but 457 plan owners can contribute even more when they are within three years of their normal retirement age.

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