Rules for the Partial Conversion of a 457 Plan to a Roth IRA

Only money from 457(b) plans or Roth 457(b) plans can be rolled into a Roth IRA because those types of plans count as qualified retirement accounts. If you have a 457(f) plan, you're not allowed to move the money into the Roth IRA because it's not a qualified retirement plan.

You can't take money out of your 457(b) plan unless you've left your job or have a severe financial hardship. Unfortunately for you, you can't convert hardship distributions to a Roth IRA -- or any other retirement account for that matter -- so don't go taking a hardship withdrawal, thinking that works as a way to convert money. In other words, iif you're still working for the employer who sponsors your 457(b) plan, you can't convert any of the 457(b) plan to a Roth IRA.

If you are able to take distributions from your 457(b) plan that are eligible to be converted to a Roth IRA, you're free to distribute as much or as little as you want, and then to roll over as much or as little of the distribution as you want. For example, say you've left your job and have $50,000 in your 457(b) plan. You could take out $15,000, only convert $10,000 by depositing it in your Roth IRA within 60 days, and keep the rest for yourself.

Generally, the entire amount of your conversion is taxable because you're moving money from a tax-deferred account, the 457(b) plan, to an after-tax account, the Roth IRA. So, you're usually better off timing your conversion to a year that you don't have too much other income. That way, you're in a lower tax bracket and can pay a low tax rate on the conversion. However, if you have money in a Roth 457(b) plan, you can move that money to a Roth IRA without paying any taxes because both accounts are after-tax.