What Happens To A 457b After Leaving Job?

Thursday, June 20th 2024

Transitioning out of employment can bring with it many changes and considerations for retirement savings, particularly if one contributed to a 457(b). We will examine what will become of 457(b) plans as employees leave their positions by exploring options available and potential consequences during transition; our objective is to shed some light on this subject so as to offer clarity and direction to anyone facing this scenario.

Introduction to 457(b) Plans

We will start this discussion off right by providing an introduction to 457(b) plans, an employer-sponsored retirement account available to employees of certain tax-exempt organizations such as state and local governments, educational institutions, and nonprofits. Participants in such plans have the chance to save for retirement on a tax-advantaged basis using pretax contributions; thus, enabling growth potential of their savings accounts.

Before leaving an employment position, one must carefully assess their degree of vesting in their 457(b) plan. Vesting refers to ownership rights for retirement accounts owned by employees; depending on an employer’s vesting schedule, employees could either become fully or gradually vested, meaning they would receive all contributions made including employer matching contributions in full; with graded vesting schedules they may only get access to some portion based on years served and therefore be entitled only partially for contribution refunds based on vesting levels over time.

Distribution Options

When leaving their jobs, individuals have various distribution options available for managing their 457(b) plan. These may depend on plan regulations or any applicable restrictions; here are the common options:

Before making a final decision on their 457(b), individuals should carefully weigh all available options and assess any possible ramifications, keeping these key factors in mind:

Retaining funds within a 457(b) plan or rolling them over into an IRA or new employer retirement plan allows for tax-deferred growth over time, while taking a lump-sum distribution could expose you to immediate taxation and potential penalties.

Seeking Professional Guidance

After leaving a job, making decisions regarding the 457(b) plan could be a bit difficult; advice from financial advisors or retirement planning experts may give valuable advice based on the specific situation of an individual, their personal goals and the rules surrounding your 457(b).


Transitioning out of employment is marked with many challenges and transition decisions to make, such as those related to retirement savings such as 457(b). Understanding all available options and their ramifications are paramount in making informed choices; carefully considering vesting rules, distribution options, tax consequences, investment flexibility requirements, estate planning needs and tax considerations are necessary in making smart choices that align with long-term financial goals. Consulting professionals in this area may further aid decision-making processes to guarantee an enjoyable retirement journey ahead.

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