Do You Pay Taxes on 457(b) Withdrawals After Age 70?

If you are approaching retirement and have savings in a 457(b) retirement plan, you might wonder which taxes you’ll pay on withdrawals after age 70. This is important when it comes to retirement planning. Otherwise, it could be hard to accurately estimate your future income and tax liabilities. While 457(b) plans offer unique benefits when compared with other retirement accounts, they are not exempt from tax rules.

Consider speaking with a financial advisor if you want help reviewing how withdrawals from a 457(b) plan may fit into your broader retirement income strategy.

457(b) Plans Explained

A 457(b) plan is a type of tax-advantaged retirement plan available to state and local government employees, as well as certain nonprofit employees. These plans allow workers to defer a portion of their salary into the account on a pre-tax basis. It grows tax-deferred until withdrawals begin.

Withdrawals

Withdrawals from a 457(b) plan can begin as soon as you separate from your employer, regardless of age. Other retirement accounts like 401(k)s and 403(b)s, typically impose early withdrawal penalties before age 59.5. However, once you start taking distributions, the IRS will tax those amounts are as ordinary income.

Required Minimum Distributions (RMDs)

Like other tax-deferred retirement plans, 457(b) plans are subject to required minimum distributions (RMDs). This means that starting at age 73 (75 for people born in 1960 or later), you must withdraw a minimum amount from your 457(b) account annually. The IRS calculates RMDs based on your age and account balance.

Calculating your RMDs and figuring out when you to take them doesn’t have to be complicated. SmartAsset has a calculator designed to help you estimate how much of your mandatory withdrawals may be and when they’re due.

Required Minimum Distribution (RMD) Calculator

Estimate your next RMD using your age, balance and expected returns.

Quickly estimate your RMDs and when to take them

RMD Amount for IRA(s)

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RMD Amount for 401(k) #1

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About This Calculator

This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.

For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.

^*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.

Assumptions

This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.

This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.

However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.

For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.

This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.

Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

Taxes on 457 Withdrawals After Age 70

So, do you pay taxes on 457 withdrawals after age 70? Yes, you do. Withdrawals from a 457(b) plan after age 70 are subject to ordinary income tax. The IRS adds the amount you withdraw to your gross income for the year. It taxes your withdrawal at a rate based on your tax bracket. Only contributions made on an after-tax basis (rare in 457(b) plans) earn an exemption, or if your income falls below the standard deduction threshold. There are no additional tax penalties for withdrawals after age 70, but the standard income tax rules still apply.

Other Considerations

A couple reviewing their retirement plan with a financial advisor.

When thinking about the tax on 457 withdrawals after age 70, there’s still more to consider. The following items may affect your tax liability and retirement income strategy.

State Income Tax

While the IRS taxes 457(b) distributions at the federal level, your state may also levy income taxes on withdrawals. Some states offer exclusions for certain types of retirement income, while others do not. For example, states like Florida and Texas do not tax income at all. This could make a big difference in your net retirement income. Check the tax rules in your state or speak with a tax consultant to understand how local governments will tax your distributions.

Mandatory Withholding

The IRS will withhold a portion of your 457(b) withdrawal for taxes when you take a distribution. This is often 20% for lump-sum distributions, although you can elect a different withholding rate depending on your situation. If too much or too little is withheld, you’ll need to reconcile the difference when you file your tax return. Planning for withholding helps avoid a surprise tax bill or a penalty for underpayment.

Retirement Planning and Income Management

While 457(b) withdrawals after age 70 are taxed as ordinary income, proactive planning can help reduce the amount of taxes you owe. By managing your income streams strategically, you can potentially lower your marginal tax rate, preserve more of your retirement savings and improve your overall financial outlook in retirement.

Here are several ways to minimize tax liability:

Delay Social Security benefits: If you haven’t yet claimed Social Security, consider postponing your benefits. Delaying Social Security up to age 70 increases your monthly benefit while also reducing your total taxable income in the earlier retirement years, making it easier to take 457(b) distributions while staying in a lower tax bracket.
Coordinate with tax-advantaged accounts: You can supplement your income with tax-free withdrawals from a Roth IRA or withdrawals from taxable brokerage accounts with favorable capital gains treatment. Using these accounts strategically alongside your 457(b) distributions can help spread income across multiple tax treatments and reduce your taxable burden.
Withdraw more in low-income years: If you anticipate that your income will rise in future years, perhaps from RMDs or pension payments, consider taking larger 457(b) distributions now while your tax rate is still low. This approach can help smooth out your income over time and avoid being pushed into a higher bracket later.
Plan around required minimum distributions (RMDs): After age 73, you’ll need to begin taking RMDs from your 457(b) unless you’re still working for the sponsoring employer. Planning ahead by gradually drawing down your account before RMDs kick in can help avoid steep tax bills later on.
Use qualified charitable distributions (QCDs): Although QCDs are generally not allowed directly from 457(b) plans, if you roll over funds to an IRA, you may use QCDs to donate up to $111,000 tax-free to charity in 2026. This can reduce your taxable income while supporting causes you care about.

Frequently Asked Questions (FAQ)

Are 457(b) withdrawals subject to early withdrawal penalties?

Unlike 401(k) and 403(b) plans, 457(b) plans typically do not impose the 10% early withdrawal penalty if you take money out after leaving your employer, even if you are younger than age 59½. However, the withdrawals are still subject to ordinary income tax.

Are 457(b) withdrawals taxed by states as well as the federal government?

In many cases, yes. While the IRS taxes 457(b) withdrawals as ordinary income, state tax treatment depends on where you live. Some states tax retirement income fully, others offer partial exclusions and a few states do not tax income at all.

Can you reduce taxes on 457(b) withdrawals in retirement?

In some cases, retirees manage their withdrawals by coordinating income from multiple sources such as Social Security, pensions, Roth accounts and taxable investments. Spreading withdrawals across different tax treatments may help manage overall taxable income in a given year. A financial professional can help evaluate how different withdrawal approaches may affect a retirement income plan.

Bottom Line

A couple evaluating their retirement benefits.

So, will you pay tax on 457 withdrawal after age 70? Yes, but, with the right strategy, you can manage those taxes and preserve more of your retirement income. Distributions are taxed as ordinary income and are subject to RMD rules starting at age 73. State and local taxes, withholding requirements, and broader retirement planning considerations can all affect your final tax bill.

Retirement Planning Tips

A financial advisor can help you set and reach different financial goals for your retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s Social Security calculator can help you estimate future monthly government benefits.