How to Convert 457 Retirement Fund to a Roth IRA

A Roth rollover can be good retirement savings strategy.

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A Section 457 plan is an employer-sponsored retirement plan much like a 401(k). It is offered to employees by non-profit organizations, is made up of pretax contributions, and requires yearly distributions at age 70 1/2. The Roth IRA is composed of after-tax money with no withdrawal requirement. Consequently, when you convert a 457 plan to a Roth, you must pay taxes on the rollover amount.

Step 1

Ask your 457 plan administrator if the conversion is allowed. Each non-profit tailors its 457 plan differently. Roth conversions might not be among the approved account actions. If you can make the conversion, proceed to the next step.

Step 2

Ask the plan administrator to make a direct, or trustee-to-trustee, transfer of your plan assets to your Roth IRA. Give the administrator the Roth trustee's name and address, as well as your Roth account number.

Step 3

Look for your IRS Form 1099-R by mail in January or February. In Box 1 of the form, find your distribution amount. The taxable amount of the distribution appears in Box 2a.

Step 4

Report the distribution when you file your IRS Form 1040. The amount in Box 1 should appear on Line 16a of Form 1040, while the figure in Box 21 should be entered in Box 16b.