As you build toward retirement, your 401(k) retirement plan is likely one of your most important savings tools. But what happens when you want more control, flexibility, or investment options—before you actually retire? This is where an in-service rollover from a 401(k) to an IRA can provide significant advantages.
An in-service rollover allows eligible employees to move funds from their 401(k) account to an IRA while they’re still working. At Banyan Wealth, we help clients evaluate whether this 401(k) rollover strategy makes sense for their unique financial picture.
Access to a Wider Range of Investment Options
Most 401(k) plans offer a limited menu of mutual funds and target-date funds. With an IRA, you open the door to a broader universe of investments—individual stocks, bonds, ETFs, mutual funds, and more. This flexibility helps you tailor your portfolio to better align with your retirement goals, risk tolerance, and investment strategy.
Enhanced Control Over Retirement Savings
IRAs typically provide more flexible distribution options and beneficiary designations compared to employer-sponsored plans. Together, we can build a tax-efficient withdrawal strategy aligned with your long-term plan.
Potential for Roth Conversions
Once funds are rolled into an IRA, you may have the opportunity to gradually convert portions into a Roth IRA, creating a source of tax-free retirement income. We can guide you through this process thoughtfully, aiming to minimize your lifetime tax burden.
Consolidation and Simplification
If you have old 401(k) plans from prior jobs, consolidating them into an IRA rollover account can help you keep track of your retirement savings more easily. A consolidated IRA simplifies portfolio management and keeps beneficiary designations up to date.
Key Considerations Before Doing an In-Service 401(k) Rollover
➡ Not all 401(k) plans allow in-service rollovers. Eligibility rules vary and may apply only to employees age 59½ or older.
➡ It’s critical that rollovers are done properly to avoid unnecessary taxes or penalties. We ensure the process is seamless, compliant, and aligned with IRS rules.
What’s Next?
Get clarity on your 401(k rollover options.
Gain confidence in your retirement strategy.
Create a customized plan designed for your goals.
Contact Banyan Wealth today to schedule a discovery call and see how an in-service 401(k) rollover could fit into your comprehensive financial plan.
1. Leave money in your former employer’s plan, if permitted
Pro: May like the investments offered in the plan and may not have a fee for leaving it in the plan. Not a taxable event.
2. Roll over the assets to your new employer’s plan, if one is available and it is permitted.
Pro: Keeping it all together and larger sum of money working for you, not a taxable event
Con: Not all employer plans accept rollovers.
3. Rollover to an IRA
Pro: Likely more investment options, not a taxable event, consolidating accounts and locations
Con: usually fee involved, potential termination fees
4. Cash out the account
Con: A taxable event, loss of investing potential. Costly for young individuals under 59 ½; there is a penalty of 10% in addition to income taxes.