Can You Contribute to a 457 After Retirement?
Understand how separation from service impacts your 457 plan. Learn the specific rules for adding money and accessing your funds after your employment has ended.
A 457 deferred compensation plan is a retirement savings vehicle for employees of state and local governments and certain tax-exempt organizations. Governed by Section 457 of the Internal Revenue Code, it allows individuals to set aside pre-tax or Roth earnings that grow tax-deferred until withdrawal. These plans have specific regulations dictating how and when money can be contributed and withdrawn, especially after employment ends.
The Rule on Post-Retirement Contributions
The ability to contribute to a 457(b) plan is directly linked to active employment and receiving a salary from the sponsoring employer. Contributions are made through payroll deductions, so once an individual retires, this mechanism ceases. This rule applies even if the retiree has other sources of income, as the plan only accepts deferrals of compensation from the employer.
Contribution eligibility is always tied to a current employer-employee relationship. If an individual retires from one job but later works for another eligible employer, they can contribute to the new employer’s 457(b) plan. However, they cannot continue making contributions to the plan from their former employer.
Pre-Retirement Catch-Up Provisions
Although contributions end at retirement, catch-up provisions allow participants to increase savings in their final working years. For 2025, participants aged 50 or older can contribute an additional $7,500 above the standard limit. A separate provision allows for a higher catch-up amount for those aged 60, 61, 62, and 63.
The “Special 457(b) Catch-Up” is available during the three years before a participant’s normal retirement age. This provision allows a contribution of up to double the standard annual limit, which is $23,500 in 2025. The exact amount is the lesser of twice the annual deferral limit or the basic annual limit plus any underutilized contributions from prior years.
Participants cannot use both the age-based and the Special 457(b) Catch-Up in the same year. They must choose the one that allows for the larger contribution.
Post-Retirement Rollovers Into a 457 Plan
Although new contributions are not allowed after retirement, some governmental 457(b) plans permit incoming rollovers. This process involves moving existing funds from other qualified retirement plans, like a 401(k), 403(b), or traditional IRA, into the 457(b) plan. This can be done even after an individual has separated from service.
This option depends entirely on the plan’s specific rules, so a retiree must consult their plan administrator to confirm if incoming rollovers are accepted. This can be a way to consolidate retirement assets. Non-governmental 457(b) plans have more restrictive rollover rules and generally only allow transfers from another non-governmental 457(b) plan.
Accessing Your 457 Funds in Retirement
A primary feature of governmental 457(b) plans is the flexibility offered for distributions after separating from service. Unlike many other retirement plans, withdrawals from a 457(b) are not subject to the 10% early withdrawal penalty, even if the retiree is under the age of 59 ½. This provides a useful source of income for those who retire early.
Distributions are subject to ordinary income tax, and retirees have several options for taking their money. These include receiving a lump-sum payment, arranging for periodic installments, or rolling the funds into another eligible account like a traditional IRA.
If rolling funds into an IRA, the money becomes subject to IRA rules, and withdrawals before age 59 ½ would generally incur the 10% penalty. It is also important to note that funds previously rolled into the 457(b) from other plan types may retain their original penalty rules if withdrawn early.