457(b) to Gold IRA Rollover
A governmental 457(b) can generally be rolled into a Traditional IRA, including a self-directed IRA that holds approved precious metals. The IRS says governmental 457(b) distributions are generally not subject to the 10% additional tax, but IRA withdrawals before age 59½ can be. That difference is worth understanding before you move the money.
A 457(b) is a deferred compensation plan offered by state and local governments and some tax-exempt employers. If you have one from a past job, you may wonder whether it can fund a Gold IRA. In most cases the answer on rollover eligibility is yes. The harder question is what you may give up by moving the money. This page covers that. For the wider picture, see the Gold IRA Rollover Guide.
This page explains rules and trade-offs. It isn't tax advice, and some points below are our reading of IRS material. A CPA or enrolled agent can apply them to your situation.
Can you roll a 457(b) into a Gold IRA?
Usually, if it's a governmental 457(b). A "Gold IRA" is a self-directed IRA whose custodian lets it hold approved physical metals. It is still an IRA, so the usual IRA rules apply.
The IRS rollover chart lists "Governmental 457(b)" as a source. It shows a "Yes" for a rollover to a Traditional IRA with no condition noted. It also shows a "Yes" for a Roth IRA, with the note "Must include in income."
There are two kinds of 457(b) plan, and they are not the same:
| Feature | Governmental 457(b) | Tax-exempt 457(b) |
|---|---|---|
| Who sponsors it | State or local governments and their agencies | Tax-exempt employers |
| Rollover to a 401(k), 403(b), governmental 457(b) or IRA | "Yes" | "No" |
Source: IRS comparison of tax-exempt and governmental 457(b) plans. The IRS also notes that tax-exempt employers may maintain 457(b) plans, but they have different characteristics (IRS).
If your plan is the tax-exempt kind, the IRS comparison does not show an IRA rollover as available. Ask your plan administrator which type you have.
When can you take money out of a 457(b)?
The plan has to allow a distribution first. The IRS says a governmental 457(b) can make distributions for unforeseeable emergencies, and that "other distributable events include the attainment of age 70 ½ and severance from employment" (IRS). Its comparison page also lists age 59½ for in-service distributions (IRS).
For most readers rolling to gold, leaving the job is the trigger. Some distributions can't be rolled over at all. The IRS lists required minimum distributions, hardship distributions and certain loans treated as distributions among the payments that are not eligible rollover distributions (IRS). Ask the plan what it can pay out and in what form.
The key difference: the 10% additional tax
This is the point that makes a 457(b) different from a 401(k) or 403(b).
What the IRS says about a governmental 457(b)
The IRS tax topic on early distributions says an eligible state or local government section 457 plan "isn't a qualified retirement plan," and that any distribution from such a plan "isn't subject to the 10% additional tax". The IRS says this does not cover distributions attributable to amounts the 457 plan received in a direct transfer or rollover from a qualified plan (IRS Tax Topic 558).
The IRS chart of exceptions has a matching footnote. It says governmental 457(b) distributions are not subject to the 10% additional tax, except for distributions attributable to rollovers from another type of plan or IRA (IRS chart).
The IRS 457(b) comparison lists taxation of a governmental 457(b) at "Distribution" (IRS), so pre-tax withdrawals are generally taxed when taken. The question here is only the extra 10%.
What this means for an IRA
An IRA is a different kind of account. The IRS exceptions chart gives IRAs their own column. In it, reaching age 59½ is a "Yes" for IRAs. So is death and total and permanent disability. Others include substantially equal periodic payments, certain unreimbursed medical expenses and some education and first-time homebuyer uses (the chart lists up to $10,000 for the homebuyer exception) (IRS chart).
The chart's exception for separation from service during or after the year the employee reaches age 55 (age 50 for public safety employees) is marked "Yes" for 401(k) and other qualified plans and "No" for IRAs on that chart. That exception isn't needed for a governmental 457(b), because the plan is outside the 10% additional tax to begin with.
Our reading of how these fit together
Put together, the IRS sources suggest this. Money left in a governmental 457(b) can generally be withdrawn after you leave your job without the 10% additional tax, even before 59½. Once the same money is rolled into an IRA, a withdrawal before 59½ is generally subject to the 10% additional tax unless one of the IRA exceptions applies. The additional tax is separate from regular income tax.
That is an interpretation of the IRS material above, not a statement about your tax bill. Whether it matters depends on your age, how soon you may need the money, and the exceptions that might apply. Have a tax professional confirm it. For how the extra tax works in general, see the 10% early withdrawal tax.
| Question | Money in a governmental 457(b) | Money rolled into an IRA |
|---|---|---|
| Is a withdrawal before 59½ generally subject to the 10% additional tax? | Generally no, per the IRS (except amounts that came in by rollover or transfer; the sources describe these differently, see above) | Generally yes |
| Is a withdrawal taxed as ordinary income? | Yes, for pre-tax money | Yes, for pre-tax money |
| Does the age-55 separation exception matter? | Not needed | Not available for IRAs on the IRS chart |
A simple illustration
Say you are 52 and left a city job at 50. You have $60,000 in a governmental 457(b). Per the IRS sources above, a withdrawal today from the 457(b) would be taxable income but would generally not carry the 10% additional tax. If you roll the $60,000 to an IRA and later take $10,000 out at 54 with no exception, the $10,000 would be taxable income, and the 10% additional tax, $1,000, would generally apply. These figures are an illustration, not a prediction or a recommendation.
Many people don't plan to touch retirement money before 59½. If that is you, this point may matter little. If you might need some of it, knowing about it before you move the money is useful.
Other things to weigh before you roll
- Costs. A Gold IRA usually has custodian, storage and dealer costs that your 457(b) doesn't. Get every fee in writing. See Gold IRA fees.
- What the IRA can hold. The IRS says an account's purchase of a collectible "is treated as an immediate distribution from such account in an amount equal to the cost to the plan." Bullion "of a certain fineness" is excluded from that definition only "if a bank or approved non-bank trustee keeps physical possession of it" (IRS). See Gold IRA rules.
- Risk. Gold and silver prices can fall as well as rise, and metal pays no interest or dividends. Putting retirement savings into one asset adds concentration risk.
- Plan features. Your 457(b) may have investment options, fee levels or protections you'd lose. Ask the plan for a fee disclosure.
How does the rollover work?
The cleanest method is a direct rollover. The IRS says you can ask the plan administrator to make the payment directly to another retirement plan or to an IRA, and that no taxes are withheld from a direct rollover (IRS).
| Step | Who | What to do |
|---|---|---|
| 1. Confirm plan type | Plan administrator | Is this a governmental 457(b)? What can I take out, and in what form? |
| 2. Open the IRA | A custodian that holds metals | Do you accept incoming direct rollovers from a governmental 457(b)? What are all your fees? Get the exact payee details. |
| 3. Request the rollover | Plan administrator | Pay the custodian for my benefit, not me. Confirm no tax withheld. |
| 4. Confirm receipt | Custodian | Has the full amount arrived as a rollover contribution? |
| 5. Buy approved metal | You, a dealer and the custodian | Is the product IRA-eligible? What is the total cost? Who holds it? |
| 6. Keep records | You | Save the confirmations from the plan, custodian and dealer. |
If the plan pays you instead (an indirect rollover), the IRS says the payment is "subject to mandatory withholding of 20%, even if you intend to roll it over later," and you have 60 days to roll it over (IRS). If you don't roll it over, the IRS says it is taxable and you may be subject to additional tax unless an exception applies. The 60-day rule page covers the details.
The IRS exceptions page lists "eligible distributions contributed to another retirement plan or IRA within 60 days" as an exception to the 10% additional tax (IRS). The extra tax question in this article is about later withdrawals from the IRA, not the rollover itself.
Roth money and Roth conversions
The IRS chart shows a rollover from a governmental 457(b) to a Roth IRA as "Yes," with the note "Must include in income." A tax professional can explain what that means for you.
Common mistakes
- Not checking the plan type. A tax-exempt 457(b) is not shown as rollover-eligible to an IRA in the IRS comparison.
- Ignoring the penalty difference when you may need the money before 59½.
- Taking a check made out to you, which triggers 20% withholding.
- Buying metal the IRA can't hold. The IRS treats a collectible purchase as a distribution of its cost.
- Acting under sales pressure. Be wary of anyone who says you must move money immediately.
Related questions
Is a 457(b) rollover to a Gold IRA taxable?
The IRS says no taxes are withheld from a direct rollover (IRS), and the rollover chart shows a governmental 457(b) can go to a Traditional IRA with no condition noted. Later IRA withdrawals may be taxable and, before 59½, may face the additional tax unless an exception applies; a tax professional can confirm.
Should I keep some money in the 457(b)?
That is a personal decision that depends on your age, your needs and your plan's rules. A tax professional or fee-only fiduciary adviser can help you weigh it.
What about other plans?
If you have a 403(b) instead, see 403(b) to Gold IRA rollover. Federal employees and service members with a Thrift Savings Plan account can read TSP to Gold IRA rollover.
Sources
- Rollovers of retirement plan and IRA distributions, Internal Revenue Service. Accessed Invalid Date.
- Rollover chart, Internal Revenue Service. Accessed Invalid Date.
- Exceptions to the 10% additional tax (chart), Internal Revenue Service. Accessed Invalid Date.
- Retirement topics - Exceptions to tax on early distributions, Internal Revenue Service. Accessed Invalid Date.
- Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs, Internal Revenue Service. Accessed Invalid Date.
- 457(b) plans for state or local governments - Key characteristics, Internal Revenue Service. Accessed Invalid Date.
- Comparison of tax-exempt 457(b) plans and governmental 457(b) plans, Internal Revenue Service. Accessed Invalid Date.
- Investments in collectibles in individually directed qualified plan accounts, Internal Revenue Service. Accessed Invalid Date.
This guide is general education, not personalized financial, tax or legal advice. See our financial disclaimer, editorial policy and advertising disclosure.