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School me on 401k in service withdrawals
Old 01-18-2017, 07:52 AM   #1
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School me on 401k in service withdrawals

Am I correct in understanding that after the age of 59.5 I can do an in service withdrawal of my company 401k to an IRA?
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Old 01-18-2017, 08:11 AM   #2
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It is called a rollover. Your Complete Guide to Rolling Over Your 401(K) into an IRA | Investor Solutions
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Old 01-18-2017, 08:18 AM   #3
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why would you want to do that? pay retail for funds in an IRA?
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Old 01-18-2017, 12:05 PM   #4
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why would you want to do that? pay retail for funds in an IRA?
Explain please. Are you saying MF's charge a lower fee to 401k plans then to individual investors?

We pay a fee to the 401k for running the plan. I don't pay fees for my Fidelity account.

I would like more control over where my money can be invested.
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Old 01-18-2017, 12:39 PM   #5
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Explain please. Are you saying MF's charge a lower fee to 401k plans then to individual investors?

We pay a fee to the 401k for running the plan. I don't pay fees for my Fidelity account.

I would like more control over where my money can be invested.
Yup, the mutual funds in a 401k can often be cheaper, sometimes by a lot. In my ex-company 401k at Vanguard I have a $5.25 fee/quarter. However, the savings over even the Admiral level funds ($10K+ invested) is big enough to cover that fee and then some. One example, is the international fund at Admiral level is 0.12% while the institutional plus version in my 401K has 0.07% fees. That's not a life changing savings but it's $50 per $100,000 and it's "free" money.

If you don't have good funds in the 401k or the fees are really high then it may make sense to move but I would do the calculations first.
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Old 01-18-2017, 02:18 PM   #6
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An in service withdrawal or rollover would mean that you are still working for the plan sponsor. This may or may not be allowed by your plan. If you are no longer working there, then you can always withdraw or rollover. As others are saying this may or may not be a good idea because a) expenses can be higher or lower in 401k, and b) the rules can be slightly different between 401k and IRAs.
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Old 01-18-2017, 03:54 PM   #7
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I assume you want to rollover into an IRA, bongo2 hit the nail right on the head.

Check the plan documents or contact your HR group.

Fees yes sometimes you can get institutional funds with slightly lower costs, sometimes not. Another thing to consider is legal protection. Your 401k is typically protected from legal issues an IRA may not be.
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Old 01-18-2017, 06:48 PM   #8
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why would you want to do that? pay retail for funds in an IRA?
I am considering doing it. The primary reason is that my choice of funds in my 401k are not great. There is an S&P 500 fund with good expense ratio. But, if I invest everything in it I end up out of balance on my asset allocation. OK, so maybe I could then put some of the money in a higher expense ratio bond fund. But, I don't have any good bond funds. Currently I do have some money in one of the only 2 bond funds I have in the 401(k). The fund I am not in is a high yield basically junk bond fund. The one I am in is a little lower risk but still relatively high risk for a bond fund. It is not the one I would want to choose. It is more designed to provide income. There are literally no other bond funds (there is a stable value fund with a high expense ratio and poor return). The only other options is a target fund with a mix of stocks and bonds. But, those have high expense ratios and I would have to give up the SP 500 fund.

So, I am very tempted to take an in service withdrawal of the part of the 401k that I want in bonds and move that to a Vanguard IRA
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Old 01-18-2017, 07:03 PM   #9
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If your 401K funds suck (bad performance, high fees), yeah, some plans let you move some of your balance out, usually after a certain age. (That age can vary but is almost never younger than 50.)

That said, there are other considerations. 401K plans (unlike IRAs) allow you to take withdrawals if you separate no earlier than the year you turn 55. That could make staying in even a somewhat subpar 401K more palatable if you plan to retire after the year you turn 55, but before you are 59 1/2.

Also, a 401K plan (and 403Bs, 457s et al), unlike an IRA, is considered a pension plan under federal law and has extra asset protection that IRAs don't have in most states. (Last I checked, only three states -- Florida, Texas and Oklahoma -- gave IRAs the same unlimited asset protection as 401Ks have under federal law.)
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Old 01-18-2017, 08:07 PM   #10
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An in service withdrawal or rollover would mean that you are still working for the plan sponsor. This may or may not be allowed by your plan. If you are no longer working there, then you can always withdraw or rollover. As others are saying this may or may not be a good idea because a) expenses can be higher or lower in 401k, and b) the rules can be slightly different between 401k and IRAs.
Yes, I still work for the company. The HR person seems to think I can do this but it's a family company and she's family and that's the only reason she has the job. She knows virtually nothing about the plan.
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