Enhancing Retirement Readiness with
In-Service Rollovers

Our client, a 60-year-old professional, plans to work for another 4-5 years and will continue contributing to their 401(k) to take full advantage of their employer match. As retirement approaches, the client seeks to optimize their investment strategy, increase diversification, and receive professional oversight. Recognizing the importance of active management during this critical phase, they are willing to pay a management fee on a portion of their retirement funds. To prepare for retirement, the client decided to move 75% of their 401(k) balance to an Individual Retirement Account (IRA) via an in-service rollover.

An in-service distribution is a withdrawal option that allows participants in a qualified retirement plan, such as a 401(k), to roll over all or a portion of their plan balance into an Individual Retirement Account (IRA) or another eligible account while still employed. Unlike standard withdrawals, this distribution is typically structured as a direct rollover, which avoids taxes or penalties as long as the funds are transferred directly to the new account. 

This option is often available to employees who are at least 59½ years old, though eligibility rules vary depending on the employer’s retirement plan provisions. This IRA is actively managed and invested in a balanced portfolio, providing access to a broader range of investment options compared to their 401(k). The remaining 401(k) balance and ongoing contributions were reallocated in a moderate-aggressive portfolio, leveraging the employer match and a higher growth strategy. 

The client plans to repeat this strategy periodically, as permitted, given their age of 59½ or older. Once retired, they intend to roll over the remaining 401(k) balance into the IRA and, if necessary, establish a monthly income stream to meet living expenses. 

The in-service rollover strategy delivered several benefits: 

1. Active Management: The client gained professional oversight on a substantial portion of their retirement funds, ensuring adjustments are made to align with market conditions and retirement goals. 

2. Diversification: The IRA’s broader investment options allowed for a more diversified and tailored portfolio. 

3. Flexibility: Maintaining the 401(k) enabled the client to continue receiving the employer match while pursuing a higher growth strategy for new contributions. 

4. Retirement Readiness: The client now has a comprehensive plan that balances growth and preservation, supporting a seamless transition into retirement. 

By proactively managing their assets and utilizing the in-service rollover, the client maximized their retirement preparedness while maintaining flexibility and control over their investments.  

We urge you to contact us today if you would like to see if this strategy would work for you.