Withdraw Your Full 401K/403B Right Now...Maybe?

Most people don’t think about rolling over their 401k/403b qualified plans until they change their employer or retire. However, these accounts are often your largest investable assets. Did you know most qualified plans allow employees to roll over their funds while they are still working for that company?

It all depends on the language in the company’s plan document. If the plan document includes the applicable provisions, participants who are still employed can access their accounts by taking an in-service distribution. Many account holders are unaware of this!

An in-service distribution is a withdrawal that a participant takes from a retirement plan while still employed. If the plan document allows for these “In-Service Withdrawals”, an employee can take a distribution of their employer contributions (matched or profit-sharing accumulations) by rolling over the funds to an IRA for the purpose of pursuing other investment options that may fit their needs better. In addition, if you are over 59 ½ years old, you can also roll over your pre-tax contributions. Current law does not allow you to roll over pre-tax contributions of an employee that is younger than 59 ½ years old.

Let’s not forget about our qualified plans when we change our employer or retire. Once employment has been terminated, there are no restrictions to roll over your plan to an IRA.

What are some of the advantages of rolling over your qualified plan to an IRA?
     1) Unlimited investment choices and professional investment management
     2) Lower cost investments available
     3) Better communication – proactive vs reactive
     4) IRA rules are simpler than qualified plans

It’s important to remember, any retirement plan distribution that is eligible to be rolled over is subject to mandatory tax withholding at the rate of 20% if the participant does not elect to directly rollover the distributed amount to an IRA or another plan. A direct rollover would avoid the 10% early withdrawal penalty as well as the mandatory 20% tax withholding.

Whether you are leaving your current employer, retiring soon, or you are 55 or older, you should take the time to look at all your options. We have done many of these rollovers. Ledyard Financial Advisors welcomes your questions and would be happy to discuss the options for your retirement assets with you.


Margie Arbuckle-Morrill
Senior Financial Advisor
margie.arbuckle-morrill@ledyardbank.com

Margie Arbuckle-Morrill joined Ledyard Financial Advisors in August of 2000. She has over 25 years of trust administrative, tax, IRA, charitable gifting and wealth management experience. Margie holds a Bachelor’s degree in Business Management from the University of New Hampshire System where she graduated with honors. In January 2002, Margie completed the Cannon Financial Institute’s Trust School with honors. In March 2004, she successfully completed her IRA Professional School training with Cannon Financial Institute. In August 2011, Margie completed all of the Certified Financial Planning course work at Boston University. Margie has also obtained her Certified Trust and Financial Advisor (CTFA) and her Certified IRA Services Professional (CISP) designations.