If you’re still working, you may or may not be familiar with a “in-service rollover”.
Most companies allow you to rollover your company retirement funds into a self-directed IRA even though you’re still working after you have reached the age of 59 1/2. There are tremendous advantages to the self-directed IRA over the options of the company retirement plan.
Company retirement plans are generally built for the accumulator, and not the pre-retiree with only years left before retirement. That means that many of the investment options are not a good fit for the risk appetite of the pre-retiree and could potentially be catastrophic in terms of loss if there is too high concentration in them.
The alternatives to high risk stock options in retirement plans are either bond funds (which can lose value in rising interest rate environments), or stable value funds which pay minimal interest.
Pre-retirees need more and better options to help them bridge the gap of income needed between their retirement expenses and Social Security. A self-directed IRA allows nearly limitless options.
I recently called TIAA, the company retirement plan provider, with one of my clients who was getting ready to retire. In the past, this company had NOT allowed employees to do and “in-service rollover” at the age of 59 1/2. But the company changed the provisions so that starting in 2019 both the employee and employer investment allocations were available for rollover.
So even if you think that you don’t have access to an in-service rollover option, you may want to check again. Companies change their provisions all the time, and it’s becoming more and more common to have this flexibility as an employee.
Did you ever take advantage of an in-service rollover?
If you have any questions, please feel free to contact me.