If you work for a state or local government, you probably have a 457(b) deferred compensation plan. And you might not realize it has a unique advantage that no other retirement account offers.
Unlike 401(k)s and 403(b)s, governmental 457(b) plans have no 10% early withdrawal penalty—at any age. This makes them incredibly flexible for early retirees and those looking to diversify into gold before traditional retirement age.
What is a 457(b) Plan?
A 457(b) is a tax-advantaged retirement plan available to state and local government employees, as well as some non-profit organizations. It's named after Section 457 of the Internal Revenue Code.
Common employers offering 457(b) plans include:
- State government agencies
- City and county governments
- Public school districts (in addition to 403(b))
- Police and fire departments
- Public universities
- Some non-profit hospitals and organizations
Like a 401(k), contributions are made pre-tax, reducing your taxable income. The money grows tax-deferred until you withdraw it in retirement.
The 457(b) Advantage: No Early Withdrawal Penalty
Here's what makes 457(b) plans special: there is no 10% early withdrawal penalty for governmental 457(b) plans, regardless of your age.
401(k) / 403(b) / IRA
- Withdraw before 59½ = 10% penalty
- Plus regular income tax
- Limited exceptions (hardship, etc.)
Governmental 457(b)
- Withdraw at any age = NO penalty
- Only regular income tax owed
- Access money after separation
Important: This Changes After Rollover
Eligibility Rules
Your ability to roll over depends on your employment status and plan rules:
You Can Roll Over If:
- You've separated from service (retired, quit, laid off)
- You're still employed but 59½ or older (some plans)
- You have a governmental 457(b) plan
- Your plan allows rollovers to IRAs
You Probably Can't If:
- You're under 59½ AND still working
- You have a non-governmental 457(b)
- Your plan restricts in-service distributions
Step-by-Step Process
Rolling over a 457(b) to a Gold IRA follows a similar process to other retirement account rollovers:
Open a Self-Directed Gold IRA
Choose a reputable Gold IRA company. They'll set up your account with an IRS-approved custodian.
Contact Your 457(b) Administrator
This is usually your state or city's deferred compensation department, not HR. Request rollover forms and confirm eligibility.
Request a Direct Rollover
Always choose "direct rollover" or "trustee-to-trustee transfer." This avoids the 20% mandatory withholding.
Complete & Submit Paperwork
Your Gold IRA company will provide the receiving account details. Submit forms to your 457(b) plan.
Purchase Your Gold
Once funds arrive (typically 2-4 weeks), work with your Gold IRA company to select IRS-approved precious metals.
Governmental vs Non-Governmental 457(b)
This is critical: not all 457(b) plans are created equal. The IRS treats them very differently.
| Feature | Governmental 457(b) | Non-Governmental 457(b) |
|---|---|---|
| Employers | State/local government | Non-profits, hospitals |
| Rollover to IRA? | Yes | Generally No |
| Early withdrawal penalty? | No | No |
| Assets protected in bankruptcy? | Yes (held in trust) | No (employer's asset) |
| Can roll to Gold IRA? | Yes | No |
How to Check Your Plan Type
Tax Benefits
A direct rollover from a governmental 457(b) to a Traditional Gold IRA is completely tax-free. No taxes owed. No penalties. The money moves from one tax-advantaged account to another.
Once in your Gold IRA:
- Your investments grow tax-deferred
- You pay taxes only when you take distributions
- Required Minimum Distributions (RMDs) begin at age 73
Roth 457(b) Option
Common Mistakes
Taking an indirect rollover
If the check is made out to you, 20% is withheld for taxes. Always request a direct trustee-to-trustee transfer.
Not realizing IRA rules apply after rollover
Your 457(b)'s penalty-free withdrawals disappear once in an IRA. If you're under 59½ and might need the money, consider leaving some in the 457(b).
Assuming all 457(b)s can roll over
Non-governmental 457(b) plans generally cannot be rolled to an IRA. Verify your plan type first.
Forgetting about your 401(a) or 403(b)
Many government employees have multiple retirement accounts. Don't forget to review and potentially roll over all eligible accounts.
457(b) Rollover FAQs
Can I roll over my 457(b) while still employed?
It depends on your plan. Some governmental 457(b) plans allow in-service rollovers at age 59½ or older. Others require separation from service. Check your plan's Summary Plan Description or contact your benefits administrator.
Is there an early withdrawal penalty on 457(b) plans?
No! This is the big advantage of 457(b) plans. Unlike 401(k)s and IRAs, governmental 457(b) plans have NO 10% early withdrawal penalty regardless of age. However, once you roll to an IRA, the IRA rules (including the penalty) apply.
Can I roll over both my 457(b) and 401(a) to a Gold IRA?
Yes. Many government employees have both a 457(b) and a 401(a) or 403(b). Each can be rolled over separately to a Gold IRA. You can combine them into one Gold IRA or keep them separate.
What's the difference between governmental and non-governmental 457(b)?
Governmental 457(b) plans (state/local government) can be rolled to an IRA. Non-governmental 457(b) plans (non-profit hospitals, private schools) generally cannot be rolled to an IRA and have different rules. Check your plan type before proceeding.
Protect Your Government Pension
See if you qualify to move your 457(b) into physical gold—without penalties or taxes.
Thomas Richardson
Former wealth manager turned Gold IRA researcher. After 20 years in finance, I got tired of watching scammers prey on retirees. Now I investigate companies and publish what I find—good or bad.