Is an In-Service Withdrawal Right for You?

June 04, 2014
By Kristan Anderson, CEBS, CFP®

First, what is an in-service withdrawal? An in-service withdrawal is a provision available in some company-sponsored retirement plans that allows for participants aged 59 1/2 or older to withdraw all or part of the their 401(k) or profit sharing plan balance and roll it into an IRA while still eligible to participate. Secondly, why would anyone want to do this? If you feel like your company’s retirement plan does not offer a sufficient variety of investment options, or the quality of these options is not to your liking, or if the plan seems too expensive for what you are getting, you might want to consider an in-service withdrawal. By moving your balances out of the qualified plan, you will be better able to manage your portfolio according to how you want to invest your money, without being limited by plan options and tied to the plan’s fee schedule.

If your plan allows in-service withdrawals (you will have to locate and read your summary plan description to find this out) and you decide to take advantage of the option, remember to keep these rollover funds separate from other IRA assets. This will help to preserve the creditor protection that is afforded to qualified plans.

 

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This report has been prepared by West Financial Services, Inc. from original sources and data we believe to be reliable. This report is for informational purposes only and should not be construed as investment, legal or tax advice. Analysis of past market conditions may not predict future market activity.