At your age of 61, there is no "Penalty" to withdraw from your 457. But you will pay taxes on the withdrawn amount. There's no exception to that either. If you withdraw now or 10 years from now you'll still pay taxes on whatever you withdraw. Just keep in mind what tax bracket you're in, and understand how tax brackets work. Many don't understand just how the bracket system works. They think that if their taxable income puts them in the 24% bracket, that they're paying 24% on all of their income. That just isn't so. Assuming you're married filing joint, you'll pay 10% on the first $19.400 of taxable income. Then you'll pay 12% on the next $59.550 of income, and 22% on the next $89.450 of taxable income.
So if your gross income is $91K you can subtract your $24K standard deduction from that, giving you $67K of taxable income. On that amount you'll pay 10% on the first $19,400 and 12% on the next $47,600 (totals to $67K) You don't get to the next tax bracket of 22% until your taxable income exceeds. $78,950. So with $67K taxable income after the standard deduction, you can take up to $11,950 out of the 457 and pay only 12% on that amount. Anything over $11,950 would be subject to the 22% tax rate.
If you want to buy a new car then of course $11.950 probably won't cut it. So go ahead and buy that new $35,000 car and put $11.950 down and take out a loan for the balance. Then next year work your finances for that you can pay off the balance with a 457 withdrawal that won't put any of your money in the 22% tax bracket. I say pay it off because that interest you'll be paying on the loan will not be deductible in any way, form or fashion. So I figure you don't want to be paying any more interest than necessary.
