Can You Roll Over a 401(k) While Still Working?

Yes, you may be able to roll over your 401(k) into an IRA while still working, depending on your employer's plan rules. This is called an in-service rollover, and it's often available to employees age 59 1/2 or older. It can provide additional retirement options, including strategies designed to protect your savings from market losses while offering opportunities for growth. Understanding how an in-service rollover works can help you determine whether it's the right choice for your retirement.

What an in-service rollover is

An in-service rollover allows you to move eligible funds from your current employer's 401(k) into an IRA while you're still employed. You can continue working and contributing to your 401(k), provided your plan allows it.

When pre-tax 401(k) funds are transferred directly into a traditional IRA, the rollover itself is not a taxable event, and no early withdrawal penalty applies. Taxes are generally due when you withdraw the money from the IRA.

Who qualifies

Whether you qualify for an in-service 401(k) rollover depends on two important factors:

1. Your 401(k) plan's rules. Your employer's plan must allow in-service rollovers. Your plan administrator can confirm whether you are eligible, and which funds can be rolled over.
2. Your age. Most 401(k) plans allow in-service rollovers beginning at age 59 1/2, although some plans may permit certain funds to be rolled over earlier.

The best first step is to check with the plan administrator to understand your options.

Why someone would do it

An in-service 401(k) rollover can give you greater flexibility and more control over your retirement savings.

Many people approaching retirement want to reduce their exposure to stock market losses and protect the savings they've worked so hard to build. Rolling eligible funds into an IRA may provide options to protect your principal from market losses, additional opportunities for growth, and the ability to consolidate retirement accounts.

These additional choices can help you better align your retirement savings with your long-term financial goals.

Making The Right Rollover Decision

An in-service 401(k) rollover can open the door to new opportunities as you approach retirement. The key is choosing a strategy that fits your financial goals.

Comparing your current 401(k) with available IRA options can help you identify opportunities for growth, protection from market losses, and greater flexibility, while understanding any differences in costs, account features, and access to your money.

Exploring Your Retirement Options

Once you roll your 401(k) into an IRA, you may have access to a wider range of retirement strategies beyond those offered through your employer's plan.

You may choose more aggressive investments with greater growth potential, but these also come with the most risk and exposure to market losses. Alternatively, certain equity indexed annuities offer opportunities for growth while protecting your principal from market losses. Some annuities can also provide guaranteed retirement income for life.

Understanding these options can help you choose a retirement strategy that balances growth, protection, and income for your future.

Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

Let's Talk About Your Retirement

Whether you're approaching retirement or already enjoying it, making the most of your retirement savings starts with understanding your options.

At Welles Consulting, we offer a complimentary, no-obligation review to help you explore opportunities that align with your financial goals. Let's see what makes sense for you.

Schedule Your Complimentary Review

Not sure where you stand?

Sources: Internal Revenue Service: Retirement Topics, Exceptions to Tax on Early Distributions; Rollovers of Retirement Plan and IRA Distributions; 401(k) Resource Guide, General Distribution Rules; Retirement Plans FAQs regarding Loans; Publication 575, Pension and Annuity Income, on eligible rollover distributions and net unrealized appreciation; Publication 590-A, on where an IRA can be opened; Publication 590-B, on how traditional IRA withdrawals are taxed (irs.gov). Employee Retirement Income Security Act, section 206(d), 29 U.S.C. 1056(d) (govinfo.gov). California Code of Civil Procedure, section 704.115 (leginfo.legislature.ca.gov). California Department of Insurance, Annuities: What Seniors Need to Know, and CalSTRS 403bCompare.com Glossary, Fixed Annuity, on who makes and guarantees annuity payments.