A Guide to Transferring a 401(k) to an IRA While Still Employed

Many employees only consider what to do with their 401(k) plans after leaving an employer, but you may have the option to roll over your retirement savings into an IRA while still working at your current job. Deciding whether or not to transfer a 401(k) to an IRA while still employed depends on your employer’s plan and investment goals.

This article answers all the essential questions you may ask when considering a 401(k) transfer. We’ll cover the basics, explain the pros and cons, explore the costs, and more.

What Are My 401(k) Options When Leaving an Employer?

Many employers offer their employees 401(k) plans, where employer contributions match those of the employees. If you have an employer-sponsored retirement plan, you likely have a 401(k).

Employees leaving their employers have several options for handling retirement plans. Your current employer may have a 401(k) sponsor that allows you to leave the money in the current plan. If not, you must cash out the account, transfer the assets from your former employer’s plan to a new employer’s plan, or roll over the money to an Individual Retirement Account (IRA).

Can You Transfer Your 401(k) to an IRA While Still Employed?

hand holding block stack together have question symbol

Whether or not you plan on leaving your job in the future, you may have the option to roll over your 401(k) to an IRA while you’re still employed. If your 401(k) plan includes a provision permitting an in-service rollover, you can make your transfer while still working for your current employer. An in-service rollover allows for the transfer of retirement savings to an IRA while still employed without the usual withdrawal taxes.

You’ll need to review your 401(k) plan’s provisions to determine whether it allows an in-service rollover. Some employer plans enforce requirements for these types of transfers, such as a particular account age or a maximum transfer amount. For example, you may need to have your 401(k) account for a specific length of time before you qualify for an in-service rollover.

What Happens When You Move Your 401(k) to an IRA While Employed?

A 401(k) account holder must be a specific age to make tax-free withdrawals, but younger account holders can transfer these funds to a new 401(k) plan or an IRA.

When you transfer a 401(k) to an IRA while still employed, it works the same way as it would if you had left your employer. When you conduct a rollover, the 401(k) sponsor will send you a check for the account’s value in the mail. You have 60 days to deposit that check into a new IRA account to avoid paying the applicable federal taxes.

Many investors trust this process to a financial advisor, who helps them create the IRA account and complete the rollover promptly to avoid the tax implications of an early withdrawal penalty.

What Are the Benefits of Rolling Over a 401(k) to an IRA While Still Employed?

man reading the benefits of rolling over 401k to ira

Choosing to roll over a 401(k) to an IRA comes with many advantages, including the following:

  • Account control: An employer-sponsored plan like a 401(k) doesn’t offer the same level of account control as an IRA. A 401(k) may include limiting provisions and asset blackout periods, whereas IRA assets give you total ownership and control. In short, an IRA provides greater financial freedom than a 401(k).
  • Portfolio diversification: If your retirement savings consist only of a 401(k), you may benefit from transferring to an IRA for investment diversification. IRAs include many more investment options compared to 401(k)s, including stocks, bonds, mutual funds, real estate investment trusts (REITs), and other investment choices.
  • Options for distribution: Traditional IRAs and 401(k) plans enforce required minimum distributions once account holders reach a certain age. This means an account holder must make minimum withdrawals annually. However, no such requirement exists if you opt for a Roth IRA.
  • Beneficiary options: While 401(k)s typically include limited options for beneficiaries, IRAs provide more flexibility. Depending on the IRA account, you may be able to name several beneficiaries, create beneficiary restrictions, and even name a trust as the beneficiary of your account.
  • IRA options: You have more investment options with an IRA when choosing the type of investment account you want to open. For example, you may opt for a traditional IRA, a Roth IRA, or a Gold and Silver IRA, wherein a depository stores the assets as precious metals.

Only you and your professional advisor know your financial situation and can make a smart decision for your retirement accounts. Talk to your financial planner to determine whether you could benefit from a rollover IRA.

What Are the Disadvantages of Rolling Over a 401(k) to an IRA?

Despite the benefits, the transfer of a 401(k) to an IRA while still employed may not suit everyone. Reasons to wait to roll over your 401(k) include the following:

  • Early retirement: If you want to retire and withdraw funds from your retirement savings plan before you turn 59 and one-half, you may consider keeping your 401(k). Many 401(k) plans allow account holders to withdraw funds at age 55.
  • Applicable fees: The increased investment options can result in higher fees than you pay with a 401(k), depending on the investment vehicles you choose. For example, mutual funds and other managed products often involve extra fees. Your financial planner can help you estimate the difference and costs to help you determine whether rolling over to an IRA is worth it.
  • 401(k) loans: If you need funds while still employed, you may be able to borrow the money from your 401(k) account, but IRAs don’t allow account holders to take out loans from available funds.

You may discuss these benefits with your financial planner to decide whether an IRA rollover suits your situation or whether you should wait for a more appropriate time.

How Much Does It Cost To Roll Over a 401(k) to an IRA?

calculator pen and one hundred dollar bills on table

You don’t have to worry about the cost if you want to transfer your 401(k) to an IRA while still employed. IRA rollovers typically don’t cost anything.

If you use a financial advisor to set up your IRA account, they will probably charge you, but the average costs for a financial planner range between 1% and 3%, lower than the average 401(k) fees. We recommend speaking with a professional advisor when transferring money between retirement accounts to prevent avoidable tax consequences.

Other fees associated with IRAs will depend on your annual fees and the investment options you choose. You likely won’t incur fees for investing in stocks, but mutual funds and managed products often include added costs.

Financial planning with a professional can help you understand the fees you may incur from transferring a 401(k).

How Long Does an IRA Rollover Take?

The typical timeline for an IRA rollover is between two and four weeks, although you will have 60 days to complete the transfer. Your timeline may vary depending on your situation and the type of IRA you choose, but your financial advisor can provide you with a more specific time estimate.

What Is the Best IRA for a 401(k) Rollover?

Consider a gold or silver IRA if you want to roll over your current retirement plan.

This IRA type makes an excellent choice for long-term investment by diversifying your retirement portfolio and hedging against market volatility and inflation. Precious metals have historically held their value. For example, gold prices may fluctuate, but gold continues to provide stability as an investment commodity.

You don’t have to commit to a traditional IRA to invest in physical gold and silver. You can also choose whichever IRA type best suits your needs. Gold and silver Roth IRAs provide the same benefits as money-backed Roth IRAs.

What Other Types of Retirement Accounts Can I Roll Over to an IRA?

In addition to 401(k) accounts, you can roll over other qualified plans to IRAs, including pension plans, SIMPLE IRAs, 403(b)s, 457(b)s, and thrift savings plans (TSPs). Oxford Gold Group can help you roll over any of these retirement accounts into a precious metal IRA.

Rollover Your 401(k) to a Gold or Silver IRA With Oxford Gold Group

Contact Oxford Gold Group to learn about retirement account rollovers to gold and silver IRAs. We help investors purchase precious metals and create precious metal IRAs.

If you want to transfer a 401(k) to an IRA while still employed, we can help. We’ll handle the entire rollover process for you, including setting up your new IRA account, transferring the money, helping you choose the best precious metal products, and shipping your silver and gold to a secure depository. Contact us online today or call 833-600-GOLD to learn about your gold and silver IRA options.

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