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Rolling over 401K while still employed with company

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  • Rolling over 401K while still employed with company

    Does anyone have experience with rolling over a 401K while working for a company, while actively continuing to contribute money to the 401K? I currently work for a hospital group whose 401K plan consists of only 20 choices, all of which have high fees. I'd like to periodically roll the contributions over to my Vanguard IRA while still contributing to my 401K, but I'm not sure if this allowed, and if it is what are the possible negatives associated with this transfer?

  • #2
    You'll have to see if your plan lets you do this "in service distributions" - most do not.

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    • #3
      You will need to check your plan document keep your plan document to see if in-service distributions are allowed; and, if so, under what condition. For instance, I have a client whose plan allows them, but only for employees over 55.

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      • #4
        IRS regulations prohibit the in-service withdrawal/rollover of employee deferrals (traditional and Roth) prior to age 59 1/2, but do allow them >= age 59 1/2.

        IRS regulations do allow the in-service withdrawal/rollover of vested employer contributions, previous rolled in assets and employee after-tax contributions prior to age 59 1/2.

        An employer can but is not required to permit the specific allowed in-service withdrawal/rollover options they choose.

        Since the majority of your 401k assets are likely to be employee deferrals and earnings, you are likely to be disappointed regardless of what your employer allows, unless you are >= 59 1/2.

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        • #5
          Likely not. But you shouldn't want to anyways due to the prorata rule.

          Either lobby for better options or vote with your feet.

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