Many plans allow for an In-Service Rollover if the employee is over 59 ½. (Note: Plans can also institute a mandatory number of years worked.) Taking all or a portion of your current 401(k) and rolling it into an IRA account avoids taxation when done correctly.
This In-Service Rollover option is not right for everyone. However, in some cases, it can provide an attractive alternative and two of these are discussed below:
Expanded Investment Options: Most retirement plans have a limited number of available options. As you near retirement, you may seek or need options that are not available in your current plan. Many investors want to become more conservative with their savings as retirement nears which limits the options in their plan. Rolling over the money allows an investor to have a wider array of conservative options to choose.
Wealth Transfer Options: A spouse that inherits a 401(k) can rollover the fund into an inherited IRA and will have all the flexibility that an IRA offers its original owners. However, single owners or owners who want to leave funds to their kids or grandkids will often have limited options. Kids and grandkids can rollover the funds in an inherited IRA but only if the company permits it. If they don’t, the potential to extend the account through tax savings can be lost.
If you have any questions about the option of an In-Service Rollover, please call one of our investment consultants at 1-866-739-7064. By meeting with them, they can help explain the options and help determine if the option is appropriate for you assuming your retirement plan allows an In-Service Rollover feature.
Securities and investment advisory services offered through Financial Network Investment Corporation, member SIPC - Founders Federal Credit Union, Founders Financial Group, LLC and Founders Insurance Services are not affiliated with Financial Network Investment Corporation. Financial Network Registered Sales Branches are located at 607 N. Main Street, Lancaster, SC 29720; 1290 Old Springdale Road, Rock Hill, SC 29730; 100 Springcrest Drive, Fort Mill, SC 29715; 1307 Boiling Springs Road, Spartanburg, SC 29303.
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This article was written by Keith Benton with Founders Investment Services Team. It was published in Founders CU Connect Newsletter (January 2013).