Author Topic: Rolling over 401K into IRA while still employed?  (Read 828 times)

merlin7676

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Rolling over 401K into IRA while still employed?
« on: October 17, 2018, 02:13:41 PM »
I know when you leave a company, you should not keep the 401K in the company plan and instead roll over into an IRA.

Is there any reason you couldn't do that while still employed?  I see people on here (myself included) that have limited funds and fees associated with it while if it was rolled over into a Vanguard IRA, there are more options and lower fees?

Just curious as it's not considered a taxable event that I can see.

DS

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Re: Rolling over 401K into IRA while still employed?
« Reply #1 on: October 17, 2018, 02:14:49 PM »
Your plan would have to allow "in-service distributions." Check to see if this is an option. Otherwise, usually have to keep it until separation.

ChpBstrd

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Re: Rolling over 401K into IRA while still employed?
« Reply #2 on: October 24, 2018, 08:17:40 AM »
Most 401k plans do not allow in service distributions. The firms offering these services expect a captive audience as payment for setting up everything.

terran

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Re: Rolling over 401K into IRA while still employed?
« Reply #3 on: October 24, 2018, 09:31:40 AM »
I know when you leave a company, you should not keep the 401K in the company plan and instead roll over into an IRA.

I would also challenge this statement. Many employer plans (at least those that are large enough) have access to better investments than you can access as an individual in an IRA. For example, my wife's current and previous employer's both offered institutional class Vanguard funds which are just like admiral class, but with lower expense ratios.

By leaving money in a 401(k) instead of rolling over to an IRA you also won't cause issues with a backdoor Roth if your income is ever high enough for that to be an issue.

Of course, every plan is different so make an evaluation based on the investment options your plan offers...

Dee18

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Re: Rolling over 401K into IRA while still employed?
« Reply #4 on: October 24, 2018, 10:53:56 AM »
+1 Terran
I rolled over an account, on the advice of Fidelity, and wish I had not.  After the deed, I realized the institutional fees were less than I could achieve on my own and I completely did in my anticipated Roth conversion of another, much smaller, account.

PDXTabs

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Re: Rolling over 401K into IRA while still employed?
« Reply #5 on: October 24, 2018, 11:05:49 AM »
+2 Terran

My old 401k through Fidelity is quite acceptable and doesn't endanger backdoor Roth contributions.
My new 401k through Transamerica is utter garbage, and if I ever have a chance to transfer out I will.

Cornel_Westside

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Re: Rolling over 401K into IRA while still employed?
« Reply #6 on: October 24, 2018, 11:37:56 AM »
Your plan would have to allow in-service distributions, as noted. I'd be remiss if I didn't note that if your plan allows this, then you can do a mega backdoor roth with after-tax contributions to your 401k. Note - this is not a Roth 401(k). This is an after-tax contribution. But if you have the opportunity, you can make after-tax contributions, then roll them over to your Roth IRA. These distributions do not count towards your yearly $5500 Roth IRA contribution limit. This allows you to add another $36500 to your Roth IRA per year, if you have these options. Read more about this here:

https://www.madfientist.com/after-tax-contributions/