Should You Keep Your 401(k) or 457(b) After Retirement? 3 Smart Reasons to Stay in Your Employer Plan

As you approach retirement, one big question arises: should you move your 401(k) or 457(b) into an IRA—or keep it where it is?

According to Pew Research, over half of retirees (54%) choose to keep their money in their employer’s plan. And for good reason—there are clear advantages to doing so.

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1. Continued Tax Growth and Withdrawal Flexibility

Keeping your funds in your employer plan allows your money to keep growing tax-deferred, which helps stretch savings for decades.

• Tax-deferred growth: You don’t pay taxes until you withdraw.

• Penalty-free withdrawals:

  • 401(k): Withdraw after leaving your job at age 55 or later without a 10% penalty.

  • 457(b): No early withdrawal penalty after separation.

If you don’t need the money right away, let it compound until you must take Required Minimum Distributions (RMDs) at age 73 (or 75 if born in 1960 or later).

2. Lower Fees and Institutional-Grade Investments

Employer retirement plans often include lower-cost, high-quality investment options compared to most IRAs.

Because these plans serve many participants, you benefit from group pricing and institutional funds, meaning your savings can last longer with lower fees.

3. Stronger Legal Protection

401(k) plans covered by ERISA federal law offer powerful protection from creditors and lawsuits, something IRAs may not fully guarantee.

Government 457(b) plans also provide strong protection (though rules vary by state).

When Rolling Over Might Be Better

Rolling into an IRA may make sense if you want:

• More investment choices or customized advice

• Easier account consolidation

• Greater control over withdrawals and timing

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