Take Back Control of Your 401(k) With an In-Service Rollover

In service rollover? What’s that? This little known tool can revamp your retirement and add tremendous value to your future goals.

Let’s say you now age 59 and ½ years of age and your plan is to continue to work for a few more years. You have saved funds in your 401(k) but have not been happy with the performance or guidance that you have received.  You can roll your funds into an individual retirement account (IRA), using an “in-service” rollover. 

Let’s face it, 401(k) plans fail in more ways than one; little (or too many) fund choices, high costs, and no financial guidance. The inservice rollover allows workers to move their 401(k) accounts once they hit 59 1/2 without the Federal 10% tax penalty or the State tax penalty. They can roll all the money directly into an IRA without paying tax now. Similar to an IRA-to-IRA direct rollover.

Employers and 401(k) plan administrators don’t advertise this option, and some plans don't even offer it as an option. Most workers 59 and a half and older can roll over 401(k) funds while they’re still working and contributing to the plan. This option isn’t appropriate for everyone, but in most cases it can provide better investment choices and control over your money.

One obvious reason to consider an in-service rollover is to escape a bum plan that offers expensive or mediocre funds. Another reason is that your company plan does not offer much in terms of advice.  This will allow you to rollover money to an advisor of your choice.

Another strategy; roll over part of your money. If you've some good choices in your 401(k) but not enough, roll over part of your funds to an IRA so you could invest in better quality funds like those from Dimensional Fund Advisors or Vanguard. It's a good bet that with better structured funds, lower costs, and professional asset allocation and other advice, you’ll come out ahead.

There are some advantages to a 401(k) to consider before jumping into an in-service rollover.  For more information on how a in-service distribution works contact Siena Wealth Advisors.  Siena is a fee-only, fiduciary, registered investment advisor that uses DFA funds as a part of their researched based portfolios.