Fund an IRA with a 401K In-Service Rollover

    Published: 06-16-2009
    Views: 12,310
    Financial adviser Ray Lucia discusses the benefits of using an in-service rollover to redirect your 401k contributions into a self directed IRA.

    Ray Lucia: It's generally accepted that participating in a company sponsored 401(k) plan maxing out your contributions and if it's offered by the employer taking advantage of any company match is part of a sensible retirement strategy for most baby boomers.

    But if you have analyzed your quarterly 401(k) statement and you are dissatisfied with the investment options available to you, what can you do? Well, boomers may want to investigate whether their companies permit transferring some or all of that money into a Self-Directed IRA using a technique known as in-service rollover.

    Eligibility starts at age of 591/2 and if available, an in-service rollover allows you to move money from your 401(k) to an IRA custodian you select. Then the money can be invested at your discretion in a broader range of investments, including real estate, commodities, CDs, ETFs, gold and even individual stocks.

    In-service rollovers aren't offered by every company and generally aren't widely publicized by those who do make it available. Keep in mind rollovers may not be as creditor proof as 401(k) is so if you are in a risky business with the possibility of a lawsuit, it may be not be advisable.

    Of course before you make any decision regarding your financial transactions, you need to consult with a trusted financial professional to fully evaluate all of your options. Also make sure you are aware of the fees, if any, associated with making an in-service rollover.

    Here is the bottom-line. There is the no need to feel restricted by your company's 401(k) investments strategy. There may be an alternative that gives you more diversification while you are still in-service to your current company.