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401(k) – In-service Distribution

What is a 401k In-Service Distribution?We’ve discussed before the benefits of rolling your 401(k) into an IRA. What you might not know, however, is that your 401(k) savings may be available to roll out much sooner than you might think – often, even while you’re still working at your employer and contributing to your plan. This is done using a feature called in-service distribution.

What is a 401k In-Service Distribution?

More commonly, 401(k) plan providers are allowing their participants to roll over all or some of their savings to an IRA while still working. In other words, you may no longer have to wait until you leave your job to access the funds in your 401(k) plan. This allows your funds to be managed in service of your financial plan and consolidated with your other investments much earlier than you may have thought possible.

Benefits of a 401k In-Service Distribution

There are a few questions to ask yourself when considering an in-service distribution: how are you currently managing your 401(k)? Is your 401(k) working in service of your financial plan?

Too often, 401(k) savings are kept isolated from your overall financial plan, when they very well could have an essential role to play in your retirement lifestyle.

Here are some important benefits to consider:

Ownership & Control

In a 401(k), you are a plan participant, not an owner, and so must abide by the plan rules and restrictions. This can even affect the availability or frequency of withdrawals. When your funds are moved to an IRA, you have full ownership and control of distributions.

Investment Options

In a 401(k) plan, you are limited to the investments on offer by the plan. 401(k) plans typically offer limited investment options, which may be high in fees or which contradict your strategy. IRAs offer more investment choices, which can be specifically tailored to help you achieve your goals.

Align Your Goals & Financial Planning

Is your 401(k) working in-sync with your financial plan? The savings within a 401(k) can grow to become a significant portion of an employee’s retirement assets; it’s important to be sure they are managed in service of your financial plan, helping you to achieve your life goals and ideal retirement.

Things to Consider with 401k In-Service Distribution


IRAs do not offer loans. If you were considering taking a loan from your 401(k), it would be best to leave those funds in the 401(k) so that they are still available to you. That said, rules vary by plan, and there are a host of other factors to consider before choosing to take a loan from your plan.

Company Stock

If you hold highly appreciated company stock in your 401(k), it may be best to leave the funds untouched, as IRAs don’t provide the same beneficial taxation on Net Unrealized Appreciation.

Early Retirement

You can typically take penalty-free withdrawals from a 401(k) plan if you leave your job at age 55 or later. From an IRA, you can only take penalty-free withdrawals after age 59 ½. If you need to access the funds in your 401k prior to 59 ½, then you should consider leaving the funds in your 401(k).

What Next?

To find out if your 401(k) allows in-service distributions and other information about your plan, review your 401(k)’s Summary Plan Description (SPD). You can request this from your 401(k) provider and/or find it in the Plan Documents section of your 401(k) website. You should review the document yourself and/or share with your adviser and determine if it’s in your best interests to roll these assets to an IRA today.

Gaining access to the funds in your 401(k) can be a powerful tool, but it’s important to remember that your situation is unique. Your decision about whether to utilise an in-service distribution from your 401(k) should be based on your individual circumstances in conjunction with the guidelines above. Additionally, the above list of reasons is not exhaustive. It merely covers the most common reasons.

Navigating how to best manage your finances can be confusing. Download one of our helpful guides to get more expert insight about UK expat retirement.

How Plan First Wealth Can Help You

At Plan First Wealth, this is one of the many areas in which we help our clients. We research the options for your 401(k) plan within the context of your unique situation and advise you on the best course of action. View the rest of our services here.

Would you like help making decisions about your 401(k)? If so, please contact your financial advisor or reach out to PFW at: info@planfirstwealth.com or 646.201.4865.

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Plan First Wealth Is A US/UK Wealth Management Firm Serving Successful British Expats in America With at Least $1M net worth Make the Most of their Opportunity.

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