“I just turned 59 and plan to retire when I hit 66. I work for a good sized company that offers a 401(k) that no one likes. The investments in our 401(k) just aren’t very good. I’ve been in the plan more than 20 years and have most of our retirement savings there.
One of the guys on my shift told us he just moved his 401(k) out. He’s the same age as me and isn’t going to retire for at least 5 years. He swears he took the money out without paying taxes or getting hit with penalties. He even said the company didn’t care. Is this too good to be true?
No. It is likely quite true and . . . you can likely do it too.
Your friend (from your description) took advantage of a 401(k) plan option called an
in-service rollover. In most plans, employees who are age fifty-five (55) or older can move their current 401(k) balance into an IRA without taxes or penalties. Once inside their new IRAs, the employee can do two pretty cool things. First, they can invest in the full universe of available investment options within their IRA. Second, they can continue to participate in and contribute to (and receive employer matches, if any) their 401(k) until they leave the company.
Before you decide to follow your friend with an in-service rollover you should take the time with a financial professional to review your current 401(k). A professional may find the options within your plan to be quite acceptable to meet your goals. You may find the fee structure of your 401(k) is preferable to an IRA. Please take your time and make the best choice for you rather than play follow-the-leader.
Our More than Money advisors can perform this 401(k) review for you at no charge.
If you have questions or comments, please send them to [email protected]