Many people assume they must leave their job before they can move money from a 401(k) into an IRA. In reality, the answer depends on which 401(k) account you are talking about and what the plan allows.
If you have an old 401(k) from a previous employer, you may generally be able to roll eligible funds into an IRA even though you are currently working for another employer. However, if you are still working for the same employer that sponsors your current 401(k), you generally need to meet the plan’s requirements for an eligible distribution before you can roll those funds into an IRA.
Understanding these rules can help you determine whether a 401(k) rollover makes sense for your retirement strategy.
Can You Roll Over a Current 401(k) While Still Working?
Yes, but only if you meet the criteria set out by your employer’s 401(k) plan.
According to the IRS, retirement plans are not necessarily supposed to offer all possible distributions. When it comes to distributing funds from the plan, the plan document dictates at what point it is possible.
Certain 401(k) plans might allow in-service distributions after one reaches a certain age, typically 59½, while other plans might have further conditions or limitations.
So being still employed does not necessarily make you ineligible for rolling over, but you need to find out if the plan allows it.
What Is an In-Service Distribution?
An in-service distribution refers to taking money out of your retirement plan when you are still actively working for the company that sponsors the plan.
Your ability to get one will depend on how your 401(k) plan is set up and what kind of money you have in your plan.
For instance, there might be rules that permit some plan participants to make an in-service distribution if they reach age 59½. There may be other rules for various types of contributions.
Check your plan documents to see if you are eligible.
What If the 401(k) Is From a Previous Employer?
This case is usually much simpler to handle.
If you are no longer working at the company sponsoring your old 401(k) plan, you may usually transfer your qualified funds to a traditional IRA or another eligible retirement account. According to the IRS, termination of employment is one of the events that would qualify your retirement plan account for distribution, depending on the terms of your plan.
In other words, you could continue to work full-time at your current company while rolling out your retirement funds from your previous company’s 401(k) plan to an IRA.
Can You Roll a 401(k) Into a Gold IRA While Still Working?
This will depend on the eligibility of your 401(k) account to take a distribution and then roll over.
If the 401(k) plan of your current employer allows you an eligible in-service distribution, there might be a possibility of rolling over the eligible funds into an IRA. The IRA receiving your funds will then potentially allow holding eligible precious metals depending on IRS criteria.
It is not possible to withdraw funds from your active 401(k) and transfer them into a Gold IRA. This can only happen after you ascertain that the 401(k) plan allows you to make a qualified distribution.
There are also certain criteria related to the holding of eligible precious metals in a Gold IRA.
What Are the Benefits of a 401(k) Rollover?
There can be various benefits of a rollover, based on your personal situation.
More Investment Choices
Investment options available in employer-based 401(k) plans are typically limited to what is provided in the plan. There are usually more options available for investing in an IRA.
Retirement Account Consolidation
If you have any retirement savings in other employer 401(k) plans, you may choose to consolidate them into an IRA.
Access to Precious Metals
If you wish to include precious metals in your retirement portfolio, a properly structured Gold IRA will enable you to do that.
Greater Control
IRAs are typically more flexible when it comes to the ability to choose where to invest and who will manage the account as a custodian.
Nonetheless, the decision to roll over depends on how well an investor compares fees, investment options, services, and protections in IRAs.
How Does a 401(k) Rollover Work?
After establishing that the 401(k) distribution qualifies, there are two primary methods to choose from.
The first is a direct rollover, in which the funds are directly transferred from the current retirement plan to the IRA or qualified retirement plan. This will help to avoid additional withholding and make the process easier.
If you opt for an indirect rollover, the 401(k) distribution will be transferred to you, and within 60 days, you must transfer the qualifying amount to another retirement plan. The 401(k) distributions transferred to you will generally be subject to 20% mandatory withholding.
Given such rules, it may make sense to consider a direct rollover with the plan administrator and the receiving custodian.
What Should You Check Before Rolling Over a 401(k)?
Prior to initiating the process, keep the following questions in mind:
- Is there an option of in-service distribution in your existing 401(k)?
- Have you met the required age or any other criteria for qualification?
- Are the assets eligible for rollover?
- What fees do you have to pay for your existing 401(k)?
- What fees would you have to pay for the new IRA?
- What would be your investment options?
- In case you opt for a gold IRA, what are the acceptable metals?
- Who would be the IRA custodian?
- Where and how would the precious metals be stored?
A rollover can have important tax and retirement-planning consequences, so it is important to understand the rules before moving money.
Final Thoughts
So, can you roll over a 401(k) while still working? The answer is sometimes. If the 401(k) is from a former employer, eligible funds can generally be rolled into an IRA. If it is your current employer’s 401(k), your ability to roll over funds while continuing to work generally depends on the plan’s distribution provisions and whether you meet the applicable requirements.
If you are considering moving retirement savings into precious metals, Global Gold Investment can help you understand your options. As Gold IRA & Precious Metals IRA Specialists, Global Gold Investment helps investors explore Gold IRA strategies and understand important considerations involving eligible precious metals, custodians, storage, and retirement-account rollovers.
Before initiating a rollover, review your 401(k) plan documents and consider consulting a qualified tax or financial professional about your individual circumstances.
This article is for educational purposes only and is not tax, legal, or investment advice.
