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An in-service rollover allows you to move assets from your current employer's plan to an IRA.

If you’ve ever changed jobs, chances are you’ve considered rolling over your old 401(k) to an individual retirement account. But can you roll over your 401(k) even if you haven’t changed jobs? The answer lies in what’s known as an in-service rollover. However, before proceeding with one, you may want to speak with a financial advisor in your area about how to best save for retirement.

What Is an In-Service 401(k) Rollover?

An in-service rollover is the transfer of assets from your current employer’s 401(k) plan to an IRA. While rollovers are typically completed when you leave a job, an in-service rollover enables you to move money out of your current 401(k) and into an IRA without a job change. Those seeking more investment choices or lower fees may explore this rollover option.

Who Is Eligible for an In-Service 401(k) Rollover?

It all depends on your plan. Not all plan providers offer in-service distributions, and for those that do, their rules and conditions may vary. One plan may limit in-service rollovers only to employees who are 59½.

Plan providers might also have special requirements for in-service rollover eligibility. You may only be eligible if only you have contributed to the plan for a minimum of five years. Meanwhile, some plans might only permit assets to be rolled over if they have been in the account for two years.

Regardless of your circumstances, you’ll first want to review your 401(k) summary plan document and then contact your plan provider to find out if you are eligible and what conditions apply.

Reasons to Use an In-Service 401(k) Rollover

An in-service rollover allows you to move assets from your current employer's plan to an IRA.

The benefits of an in-service rollover are the same as a conventional rollover. Moving money out of your 401(k) and into an IRA gives you more control and flexibility with your investments.

While 401(k) plans typically offer a limited set of investments, IRAs afford investors virtually limitless options for buying mutual funds and exchange-traded funds, individual stocks and bonds, real estate investment trusts and other securities. Your IRA may also have lower fees than your 401(k).

Drawbacks of an In-Service 401(k) Rollover

The drawbacks of an in-service rollover mirror that of a regular rollover. While IRAs generally enjoy fewer legal protections than 401(k) plans, the owner of an IRA cannot borrow money from the account, unlike a 401(k). The age at which an IRA owner can take distributions is also greater than someone with a 401(k) who may become eligible for penalty-free withdrawals at age 55. Once your money is rolled over into an IRA, you’ll have to wait until you turn 59½ to access the money without triggering the 10% IRS penalty.

Lastly, an in-service rollover may affect your ability to contribute to your company’s 401(k) plan. Some providers may preclude you from making tax-deferred contributions to your 401(k) for a period of time following an in-service rollover.

Bottom Line

An in-service rollover allows you to move assets from your current 401(k) to an IRA without switching jobs.

An in-service rollover may be a good financial decision for an employee seeking more investment options than what their 401(k) offers. However, not all 401(k) plan providers offer them, and those that do could have specific requirements for qualifying. You’ll need to contact your plan administrator to determine if an in-service rollover is an option for you. Keep in mind, too, that while federal law provides blanket protection for 401(k) assets, the legal protections for IRAs can vary from state to state. You’ll want to find out whether IRA assets are shielded from creditors and lawsuits in your state.

Tips on Rolling Over Your 401(k)

  • Work with a financial advisor to optimize your retirement planning. If you’re unsure where to start, SmartAsset’s financial advisor matching tool can help you find professionals in your area. Get started now.
  • Whether you’re contemplating a conventional rollover or an in-service transfer, understanding how much you’re paying in fees and other charges is an important part of the process. Review your current plan’s fee disclosure and research the fees associated with funds you’re interested in for your IRA.

Photo credit: ©iStock.com/towfiqu ahamed, ©iStock.com/Piotrekswat, ©iStock.com/ mapodile

Patrick Villanova Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.
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