Wondering if an in-service rollover is right for you? Learn when this innovative 401(k) strategy can most effectively grow and protect your retirement savings from the financial legacy experts at Prosperity Group. We’ll also discuss choosing the right time for this bold and secure retirement strategy, backed by hard-won industry insights and experience leveraging retirement interests for those representing a broad cross-section of future earning potential.
Understanding the In-Service Rollover
An in-service rollover is a financial strategy that allows certain individuals to move funds from their current employer-sponsored 401(k) plan into an IRA or another retirement account-without leaving their job. Unlike a traditional rollover that usually occurs after a job change or retirement, an in-service rollover happens while you’re still employed.
It’s important to note that an in-service rollover is not a withdrawal. The funds remain in a tax-advantaged retirement account, where they’ll continually grow with potential tax deferrals. However, not all 401(k) plans permit this option. Plan rules vary, so it’s essential to check your specific plan documents or consult your HR department.
When an In-Service Rollover Becomes a Smart Move
In-service rollovers aren’t for everyone, but there are several situations where they might align with your financial goals. Here are a few scenarios where individuals find greater advantage in employing an in-service rollover:
Limited investment choices:
- Some 401(k) plans offer a narrow set of funds. Rolling over to an IRA could provide broader investment options and more control over your portfolio.
High account fees:
- If your current 401(k) charges steep administrative or fund management fees, a rollover might help you reduce costs and retain more of your investment growth.
Active fund management:
- Individuals nearing retirement often want more personalized investment strategies, especially those aimed at minimizing taxes and managing risk.
Age 59½ or older:
- Most plans only allow in-service rollovers once you reach this age. If you qualify, it may be worth exploring how this move fits into your long-term retirement planning.
In all cases, it’s necessary to consider how timing, tax implications, and future growth potential align with your retirement timeline.
401(k) vs. Potential Rollover Destinations
Before moving funds, it’s important to understand what an IRA (or another qualifying retirement vehicle) may offer that your current 401(k) doesn’t. While 401(k) plans are designed for long-term retirement savings, they often come with limitations in flexibility and strategy.
An IRA, by contrast, could potentially offer:
- A wider range of investment options, including individual stocks, ETFs, bonds, and alternative assets.
- Greater control over tax strategies, such as Roth conversions or tax-loss harvesting.
- Better coordination with a broader financial plan, especially when working with an advisor.
That said, 401(k)s can have their own advantages, like creditor protection and access to loan provisions. Comparing both environments, according to your retirement goals, is a critical part of evaluating whether an in-service rollover makes sense.
Contact Prosperity Group to Master Your Family’s Legacy
The decision to initiate an in-service rollover depends on multiple factors: your age, current plan options, financial objectives, and comfort level with a given investment strategy. It’s not a one-size-fits-all solution, but for many, in-service rollovers provide a means of taking greater control of their retirement savings while still employed.
At Prosperity Group, we help protect your assets while positioning you to confidently pursue your retirement dreams. We provide comprehensive, custom strategies designed to create tax-free income, grow your 401(k) and IRA, and minimize risk. If you’d like to explore whether this strategy is a fit for you, schedule a meeting with us at Prosperity Group Advisors to learn more about our financial services.