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In-Service Withdrawals


Many believe that their money is locked in when you are a participant in a 401(k) or profit sharing plan through an employer where you are a participating and current employee. However, certain qualifying events allow employees to access their vested balance to either withdraw and/or roll over money from those accounts and still continue to contribute.

The optional plan provision permits eligible participants to withdraw and rollover from an employer-funded profit sharing plan or 401(k) while still employed. Certain events, as outlined by the plan, can be attainment of a particular age (sometimes 50 ½, 55 or 59 ½), being within two years of retirement. Again, this is a plan option, and employers are not required to offer this. Currently, however, over 70% of plans do offer this provision. In-Service withdraws are complex, understanding all the rules and how these withdraws will affect your financial picture are critical.

This option can allow you to fund a transition to retirement or can offer investors a means, within the roll over option, to expand their investment choices as well as the availability of funds that fit into your investment strategy more appropriately.

Keep in mind this is not a one-size fits all option. It is important to keep in mind, 401(k)’s allow loans where IRA’s do not and early retirement at 55 is allowed in 401(k) withdrawals and IRA’s requirement is 59 ½ to avoid penalties. If you want to discuss in-service withdraws in more detail we would be happy to explore your options with you.



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Saturday, 02 March 2024

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