What is an in-service rollover?
An in-service rollover allows you to move all or part of your company-sponsored 401K plan into an IRA once your reach the age of 59 ½.
Who is eligible?
Employees that are 59 ½ and that have a 401K with a company that allows in-service rollovers.
How do I know if my firm allows in-service rollovers?
You can reach out to your firm's benefits department and ask them, or you can reach out to our team of professionals that focus on in-service rollovers. We can be reached at rollovers@spwm.com.
How can I process an in-service rollover?
The first step would be to find out if your company allows in-service rollovers. If they do, you can set up an IRA account with any firm and wealth advisor that you wish. At that point, you call your firm's benefits department and request a check for an in-service rollover. They then issue a check that will be mailed to your mailing address, and you must deposit that check into the IRA account within 60-days to avoid any tax penalties.
What are the advantages of in-service rollovers?
1.Transparency
401K plans tend to have high charges through expensive mutual funds. These charges are not transparent, and are charged to the investor through an expense ratio, that is not clearly visible to the client. The client never sees this charge, but the expense gets cut out of the fund's overall performance.
The problem with lack of transparency in 401K's has become so big that the department of labor has recently come out with a set of fiduciary rules for 401K plan providers in order to make them more transparent. The rules do not seem like they will be put into place for another two years. With an IRA, the investors can have a clear picture of their investments with complete access to their fee structure.
2.Control
In an IRA, you can choose any investments that you like, whether it is stocks, ETF's, individual bonds, or alternative investments. In a 401K, there are limits by your plan provider and employer.
3.Customer service
If you have ever tried calling your benefits department to ask a question about your 401K, you have likely spoken with an HR employee that does not know anything about your investment options. Furthermore, you were most likely placed on hold for quite a bit of time. Rolling over into an IRA allows you to work with a wealth advisor that can give you personal customer service. There are no 1-800 number and no long hold times.
4. Professional management
Using a professional wealth advisor allows you to work with someone to create a financial plan, establish clear goals, and plan a path to achieving these goals. The best option is to use a wealth advisor that does a complete financial plan, so that your IRA will fit into the rest of your investments, and help you achieve your financial goals.
Disclosures:
This blog is provided for informational and educational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Information contained herein is subject to change and there is no guarantee that the opinions expressed herein will come to pass. Certain information contained herein may constitute forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Your experience may vary based on your individual circumstances, and there can be no assurance that we will be able to achieve similar results in comparable situations. Nothing herein represents actual client experiences nor should it be interpreted that any information contained herein is representative of our clients' experiences. Certain information contained in this report is derived from sources we believe to be reliable; however, we do not guarantee the accuracy, suitability, completeness, relevance, or timeliness of such information, whether linked to this website, any blog post, or incorporated herein, and assume no liability for any resulting damages. A complete list of portfolio holdings and specific securities transactions for the preceding 12 months is available upon request. Any reference to a market index is included for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio. A description of each index is available from us upon request.