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+--- Thread: In-Service 401k transfer (/showthread.php?tid=1529)
In-Service 401k transfer - rayray - 05-24-2016
I've been off for a bit and as I usually do I look at different options in life, particularly, financial decisions. Most recently, I looked at brokerages and decided to keep current funds with Vanguard. However, with my research I came across a financial term I never knew about: In-Service 401k plan (withdrawal/distribution/transfer), apparently, to my chagrin different terms like to be used. My retirement benefits center uses In-Service 401k plan withdrawal, I would prefer transfer but that's neither here nor there in what it can do for an employee. This is an option of transferring certain 401k plan monies to an IRA while still working for your current employer, basically, a trust to trust transfer. The benefits would be greater control over your own dollars while still growing tax deferred, switching one tax deferred retirement vehicle for another with broader choices. Not all 401k plan's allow this option or some allow it with certain restrictions; in-other-words, it varies from plan to plan. For instance, some plans will not allow this move until the employee reaches the age of 59 1/2
I called the company's plan administrator and got the low down on In-Service 401k withdrawal rules: No contribution or matching suspensions (some companies place 6 month suspensions afterwards), does not affect possible 401k plan loans, only transfers company match and reinvested dividend monies, no penalty, no tax withholding, no age restrictions.
Personally, I want to dot all my i's and cross all my t's before doing such a move. So, the research is not done. Hey, it takes me 3 days to buy a pair of sneakers! And this is a lot to digest. What are the benefits? Does moving 401k dollars to a traditional IRA hinder a possible early retirement, i.e., 72 t rules? Are there future unforeseen tax consequences? Since I already have and contribute to a ROTH IRA is it really worth my while to open up a Traditional IRA and not contribute? Maybe, just maybe, I should be contributing to a tax deferred IRA rather then a ROTH IRA?
Has anyone ever done an In-Service 401k withdrawal? Has anyone ever considered such a move?
I searched and the link below was the only time this term/option was mentioned on the forum.
http://dividendgrowthforum.com/showthread.php?tid=360&pid=1941&highlight=in-service#pid1941
RE: In-Service 401k transfer - DividendGarden - 05-25-2016
I haven't heard of that before, but I'm very interested. I can definitely see the benefits of doing that. 401k's usually limit you to some funds, which can be overpriced, have high fees, and limited investment options. Transferring to an IRA would give you the ability to buy individual companies and limit fees.