Can you move your 401k while still working? In service distribution

QUESTION: Is it possible to roll funds from your current 401k plan into a self directed IRA, BEFORE you retire?

ANSWER: Usually Yes (If you are 59 1/2 or older)

If the options in your 401k aren’t so great, move your money elsewhere.

The process is call an in service distribution or in service withdrawal.

  • Almost anyone over the age 59 1/2 can roll funds away from their current 401k into a self directed IRA, while they are still working
  • The transfer is TAX FREE
  • You need to talk to your HR department or 401k administrator to see what their rules are. But, over 80% of companies allow you to do this

Why would you move your 401k while still working by doing an “In-Service Distribution?”

There are 2 main reasons. More Options and More Control.

You may be able to take advantage of investment options from different providers that are not available in your current 401k.

Typically 401k’s do NOT offer you the following

  • NO access to Retirement Income Annuities
  • NO access to trading individual stocks
  • NO access to certain money managers that you may like
  • NO access to gold or other commodities

So by doing an in service distribution you are able to roll some of your money to a different custodian who can offer you what you need.

Different custodians offer different options so just determine what it is you want from this portion of your 401k money, and then go about finding the right custodian that can provide it to you.

There are typically 3 reasons why someone would want to do an “In-Service Distribution”

  1. You want some guarantees on protecting principal or guaranteed retirement income
  2. You want access to different investment advisers or mutual funds
  3. Your 401k has really high FEES

How to do an In Service Distribution

The process is pretty simple, but you need to make sure you fill out the paperwork properly.

Different companies and different 401k custodians will have different paperwork.

The best way to do the transfer is usually a custodian to custodian transfer. That way your hands never touch a check and you never have to worry about the 60 day rule or tax with holding.

Once you fill out the paperwork, the back office of the new company will work with the back office of the transferring company to get everything transferred properly.

“In- Service Distributions” may or may not be the right solution for you, but they are an option to consider.

If you have a question, about moving your 401k while you are still working by using an in service distribution,  just let me know.

Here’s a link to a terrific article from Forbes that goes into some more detail “The Great 401k Escape”

Warmest regards,

Carl Ostenson

Disclaimer. This post is meant for educational purposes only. This is not to be considered investment advice. Please consult with the appropriate tax, legal or investment professional before you invest or transfer money.

Copyright: gpointstudio / 123RF Stock Photo



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