A client of mine was looking to retire May of 2008. But when the market turned in the wrong direction, he decided to postpone his retirement. His 401k provider had been switched a couple years back and was not really satisfied with his current options. He was over 59 ½ and decided one day to take advantage of an in service distribution.
*Update: You can do an in service distribution with a pension, too.
In Service Distribution- Should You or Shouldn’t You
An in service distribution allows you to rollover your vested balance from your profit sharing plan to an IRA. You will have to determine first if you are eligible. Some plans may restrict from doing so. Potential advantages may include:
- Control— 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.
- Diversification — 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 — Typically, IRAs allow non-spouse beneficiaries to “stretch” an inherited IRA over their lifetimes. This type of beneficiary distribution option is not available in most employer-sponsored plans, which may limit distribution choices for your beneficiaries. […]
