Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated August 3, 2026. Quick answer: you have four options and they are not equal. Leaving it in the plan preserves the one feature you cannot buy anywhere else — no 10% early-withdrawal tax at any age. Rolling it to an IRA destroys that permanently. Most people are told to roll it, and for a governmental 457(b) that advice is usually backwards.
The four options
- Leave it. Keeps the penalty exemption. Usually the right default if you might need the money before 59½.
- Take distributions. Available after separation without the 10% tax, at any age, subject to your plan’s own payout rules. Ordinary income tax applies.
- Roll to a new employer’s plan. Possible between governmental 457(b) plans; check whether the receiving plan tracks the money’s character.
- Roll to an IRA. Convenient, more investment choice — and it ends the exemption. An IRA is on the 4974(c) list, so the 10% tax applies before 59½.
The question that decides it
Not which has better funds. Will you need this money before 59½? If there is a realistic chance, the 457(b) is the account to keep exactly where it is, and to spend first. If you are already past 59½ and will not touch it for years, the exemption is worth nothing to you and the ordinary comparison — costs, funds, consolidation — applies normally.
The thing to check before you move anything
Related: the exemption, from the statute · how it compares to the rule of 55 · the same question for federal workers.
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Source: WiserAdvisor’s service descriptionPenalty and limit statements on this page are read from the Internal Revenue Code itself (26 U.S.C. 72, 402, 414, 457 and 4974) and from IRS Notice 2025-67 for the 2026 figures. General information, not tax advice; your plan document can be more restrictive than the Code, and it governs what your plan actually allows.