In-Service Withdrawals

The Rules.. The Laws..

The Success

The Law and Plan Rules

It’s a sad fact many 401k plans are bad: the investment choices are poor; the fees are high. People naturally ask if there’s a way to take the money out of the plan to their own account. We all know when you leave your job, you can. It’s called a 401k rollover. In most cases you should do a rollover as soon as you leave.

Can you take money out without leaving your job? Some plans do allow it. It’s called an "in-service withdrawal" or an "in-service distribution." In-service means you are still working for the employer sponsoring the plan. Because some plans allow it, a common suggestion is "ask your plan administrator."

401K In-Service Distributions

Rules of the Game

  • First things first, you HAVE to be 59 1/2.  No matter how much you dislike your current plan and you want to withdrawal it all, it’s not an option until then.

  • This doesn’t just apply to 401k’s.  Any types of retirement plans will work, too. This includes 403b’s, 457″s and pensions as well.

  • Be sure to rollover the money to an IRA.

When it comes to rolling over money from a 401K plan while still working for the employer, the law allows the following:

  • Employer contributions: match, profit sharing

  • Employee after-tax (not Roth) contributions

  • Employee pre-tax and Roth contributions only if the employee reaches age 59 ½

Reasons to Proceed

An in service distribution allows you to rollover your vested balance from your retirement plan to an IRA. You will have to determine first if you are eligible. Some plans may restrict from doing so. Here are some reasons that you might want to:


Who doesn’t like control? With an IRA, you are the account owner and have more control over your assets, free from the restrictions your employer-sponsored plan can impose.


Many employer-sponsored plans offer limited investment options. In contrast, most IRAs typically provide a wider range of investment choices across virtually every asset class. This flexibility can help you better diversify your retirement assets to meet your individual investment goals.

Beneficiary options

Upon death of the account owner, distributions to individual beneficiaries must be made within 10 years. This type of beneficiary distribution option is not available in most employer-sponsored plans, which may limit distribution choices for your beneficiaries.