The 401(k) is a pre-tax saving account that you can keep during your entire working life, as long as your employer provides it. It’s one of the best ways to save for retirement income, and employees are encouraged to open a 401(k) to secure their future.
You can transfer your funds to a new 401(k) or an Individual Retirement Account (IRA) after leaving your job. But, have you ever wondered whether you can roll over 401k while still employed? At The Financial Architects, we help our clients to understand the options they have when it comes to managing their finances. Saving for retirement is one of the best decisions you can make, and our advisors have the expertise required to guide you on financial matters, including life insurance policies.
When is it Safe to Roll Over Your 401(k)?
Rolling over your 401(k) into an IRA while still working may not be an easy process; however, it depends on your current plan. Some employers allow for rollover in special circumstances, while others do not have that provision at all. Therefore, what you should do when thinking about transferring your money from the plan is to check with your plan administrator. They'll let you know whether it’s possible to move the funds, or if you have to wait until you leave your job or attain 59½ years. At this age, the IRS allows you to make a transfer without incurring heavy penalties.
For the employers who permit their employees to transfer their balances, they have what’s called in-service rollovers. Conditions that may qualify you for in-service rollovers may include having worked for a specified minimum number of years with the company. This is usually set at 2-5 years, but it varies with each employer.
Limitations of Rolling Over 401(k) While Still Working
If your employer says you can rollover your 401(k) into another account, you’re still not permitted to take any contributions made pre-tax. The following are funds you can move:
- Money that you carried over to your existing account from a previous employer’s plan.
- Your current employer’s contributions.
- Any after-tax contributions.
What Are The Benefits of Rolling Over a 401(k) While Still Working?
You may want to move your 401(k) funds because of unsatisfactory investment opportunities offered by the current plan, and high management fees. In such a situation, transferring the funds to an IRA can be a great idea. That’s because you’ll get more investment opportunities, and the administrative costs are generally low. With your money in an IRA, you will not only still have a chance to save for your retirement, but also get better returns on your investment.
At the Financial Architects, we understand that it can be difficult to roll over 401k while still employed. However, if your plan administrator informs you that it’s possible to do so, you should put your money in an IRA as it offers investment diversification, ownership control, beneficiary flexibility, and more. Give us a call today on (888) 350-5396 for expert insight on how to manage your 401(k).