403(b) Rollover to 457(b)

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 25, 2023

Are You Retirement Ready?

Overview of 403(b) Rollover to 457(b)

A 403(b) to 457(b) rollover refers to the process of moving funds from a 403(b) retirement plan to a 457(b) plan. The 403(b) plan, also known as a tax-sheltered annuity plan, is primarily offered to employees of public schools and certain tax-exempt organizations.

A 457(b) plan is a deferred compensation retirement plan offered to state and local public employees and certain non-profit employees.

The purpose of this rollover is to consolidate retirement assets, potentially access a broader array of investment options, or adapt to a change in employment.

This procedure involves assessing both plans, confirming the receiving plan accepts rollovers, initiating the transfer (either directly or indirectly), and verifying the successful transfer and appropriate allocation of assets.

It's crucial to carefully navigate this process to avoid possible tax penalties or disruptions to long-term retirement savings.

Process for a 403(b) Rollover to 457(b)

Conducting a rollover from a 403(b) to a 457(b) plan involves several critical steps.


Before initiating the rollover process, you'll need to understand both your current 403(b) and the prospective 457(b) plans. Make sure to assess the fees, investment options, and any potential penalties associated with each plan.

Initiate the Rollover

If you decide to proceed with the rollover, the first step is to confirm that your 457(b) plan accepts rollovers from 403(b) plans. This information can typically be obtained by contacting the plan administrator.

Initiate the Transfer

Once you've confirmed that a rollover is possible, you can initiate the transfer process.

This process can either be a direct rollover, where the funds are transferred directly from your 403(b) account to your 457(b) account, or an indirect rollover, where the funds are distributed to you, and you have 60 days to deposit them into the new account.

Post-rollover Confirmation

After the rollover, it's essential to confirm that the funds have been successfully transferred to your 457(b) account. Additionally, you'll want to review the investment options in your new plan and ensure your assets are allocated according to your investment strategy.

Process for a 403(b) Rollover to 457(b)

Benefits of a 403(b) Rollover to 457(b)

There are several advantages to consider when contemplating a 403(b) rollover to a 457(b) plan.

Expanded Investment Options

One of the significant benefits is the potential for expanded investment options. While 403(b) plans are often limited to annuities and mutual funds, 457(b) plans may provide a broader array of investment options, depending on the plan's specifics.

Streamlined Retirement Savings

Consolidating retirement savings from multiple accounts into a single 457(b) account can help streamline your retirement planning. It simplifies management and provides a clearer picture of your overall retirement savings.

Distinct Features of 457(b) Plans

457(b) plans come with unique features that might not be available with 403(b) plans. For instance, unlike 403(b) and 401(k) plans, there's no 10% penalty for withdrawals before age 59½, providing greater flexibility for early retirement.

Challenges of a 403(b) Rollover to 457(b)

Despite its potential benefits, a 403(b) rollover to a 457(b) plan also presents certain challenges.

Potential for Fees and Penalties

There could be fees associated with the rollover, such as surrender charges on annuity contracts within the 403(b) plan. Additionally, an indirect rollover can trigger taxes if you fail to deposit the funds into your 457(b) account within 60 days.

Limited Accessibility

Some 457(b) plans may limit access to the funds until the plan participant experiences a "trigger" event, like separation from service, which might not align with your financial needs.

Employer Plan Restrictions

Not all 457(b) plans accept rollovers from 403(b) plans. It's important to confirm the specifics of your plan before initiating the rollover process to avoid complications.

Benefits and Challenges of a 403(b) Rollover to 457(b)

Key Considerations for a 403(b) Rollover to 457(b)

When contemplating a rollover from a 403(b) to a 457(b), there are several key considerations to keep in mind.

Comparison of Plan Features

Understanding the unique features, advantages, and limitations of both your current 403(b) and prospective 457(b) plans is crucial. It ensures you're making a fully informed decision that aligns with your financial goals and retirement strategy.

Understanding Tax Implications

Rollovers can have tax implications. Direct rollovers generally don't incur taxes, but with indirect rollovers, you could end up with a significant tax bill if you fail to deposit the funds into your new account within the 60-day window.

Role of Financial Advisors

Given the complexities involved, consulting with a financial advisor is highly recommended. They can provide personalized advice, taking into consideration your financial situation and retirement goals.

Final Thoughts

Rollover from a 403(b) to a 457(b) plan can be a viable retirement strategy for employees transitioning within the public or nonprofit sector.

This move consolidates retirement savings, potentially simplifying account management and offering a wider range of investment options.

However, it's crucial to thoroughly understand both plans' features, fees, and potential penalties before initiating the rollover. Moreover, not all 457(b) plans accept rollovers from 403(b) plans, and there may be fees or penalties involved.

Key benefits include increased investment options, streamlined retirement planning, and unique 457(b) features like no penalty for early withdrawals. However, accessibility limitations and potential tax implications need to be considered.

Therefore, professional advice from a financial advisor is highly recommended to navigate this complex process and make informed decisions that align with one's financial goals and retirement strategy.

403(b) Rollover to 457(b) FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

Meet Retirement Planning Consultants in Your Area