Many workers age 55 and older don't realize they may be eligible to roll over a portion of their 401(k) or 403(b) to an IRA while still employed. This in-service rollover strategy can unlock better investment options, lower fees, and early ROTH conversion planning.
What does this mean for your retirement plan?
TL;DR: Many employer plans allow workers age 55 or older to roll over a portion of their 401(k) or 403(b) to an IRA while still employed — this is called an in-service rollover. Not all plans permit it. Check your Summary Plan Description or ask your plan administrator. Benefits include more investment options, lower fees, and the ability to begin ROTH conversion planning before retirement.
What Is an In-Service Rollover?
An in-service rollover (also called an in-service distribution) allows active employees to move a portion of their employer plan balance to an IRA while still working. Unlike a regular rollover — which is triggered by leaving an employer — an in-service rollover occurs while you are still employed.
Most plans that permit in-service rollovers require participants to be age 55 or older, though some plans allow distributions at age 59½ or after a certain number of years of participation.
Why Would I Want to Roll Over My 401(k) While Still Working?
The primary reasons are investment flexibility and fee reduction. Most employer plans offer a limited menu of mutual funds with limited transparency on fees. An IRA gives you access to thousands of investment options and allows you to work with a fiduciary advisor who is legally obligated to act in your best interest.
In-service rollovers also allow you to begin ROTH conversion planning before retirement — a strategy that is generally not available inside employer plans. By moving funds to an IRA, you can start converting pre-tax dollars to tax-free ROTH dollars during years when your income may still be relatively high, but before RMDs begin.
How Do I Know If My Plan Allows In-Service Rollovers?
Check your plan's Summary Plan Description (SPD) — a document your employer is required to provide. Look for language about "in-service distributions" or "in-service withdrawals." You can also contact your plan administrator or HR department directly.
If your plan does not permit in-service rollovers, you may still be able to roll over after-tax contributions (if your plan includes them) or take a distribution from a prior employer's plan that you have not yet rolled over.
Advisory services are offered through ABC Wealth PR, LLC, a SEC Investment Advisor. This article is for informational purposes only.
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