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whyme

Change to 457b withdrawal eligibility age

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I just learned about this, via Dan and Scott's podcast.

The age of eligibility to rollover 457 assets (even if you are still working for the same employer) has recently been changed from 70 1/2 to 59 1/2 (now it's the same as a 403b in this respect).  

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I listened to the podcast also, which I always enjoy and learn from. I think they were talking about distributions, not rollovers. And the word "even" shouldn't be there. If still employed by the plan's sponsor, the 403b allows a distribution at age 59.5, while the 457 did require an employee to wait until age 70.5 before taking a penalty-free distribution if still employed. The new law lowers that 70.5 age for the 457 and makes it age 59.5, the same as that of the 403b. 

The advantage of the 457 over the 403b remains the same as far as distribution after separation from service---there's no 10% early distribution penalty on the 457 and there is for the 403b. 

The general rule for the 403b is that there's an early distribution penalty before age 59.5, but there's an exception to that. If the employee separates from service at age 55, there's no penalty on distributions from that last employer's 403b plan. I took advantage of this and took a penalty free distribution from my 403b at age 58.

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Krow, I've modified my post to reflect your copyedit.

It is notable that this change in the law allows for a rollover without taxes (or penalty) after 59 1/2.  I wrote this post because I thought there might be readers in a situation similar to mine: I have a high cost Nationwide 457 account (my only 457 option), I am over 59 1/2 and still working for the same district.  It's good news for me that I can now move those Nationwide funds into my Vanguard IRA without cost.  I'm planning to keep my tax-deferred assets in that IRA until distributions are required, beginning at age 72, if I can manage to do so.  

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