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How an In-Service Rollover Can Help

How an In-Service Rollover Can Help

November 16, 2022

Roughly 55% of Americans invest in a 401(k) plan. Recent market volatility has many wondering if there might be other options, as the average 401(k) this year has lost $34,000. An alternative to the standard 401(k) does exist for many: the in-service rollover. 

What Is an In-Service Rollover?

An in-service rollover is a feature offered with many 401(k) plans in which current employees are able to move some or all of their 401(k) funds into an IRA. Most people think that rollovers only apply when you change jobs or retire, but an in-service rollover allows you to move your money while you’re still employed. While this is a common feature, it’s not offered with every 401(k) plan, so it’s important to consult with your plan provider before moving any money from your account.

If your plan does offer an in-service rollover, there are many benefits to incorporating this option into your retirement plan.

No Penalty

Typically there is a 10% penalty for withdrawing retirement funds before you reach full retirement age. With an in-service rollover, however, you will avoid this penalty if you are at least 59½ at the time of the transfer. You also won’t be required to pay the deferred taxes on the funds that you roll over. Essentially, you are just moving the money from one account to another.

This is a unique planning opportunity that can be used to strategically reposition your investments in the years leading up to retirement.

Better Investment Options

Another benefit of an in-service rollover is exposure to better investment options that may not be available through your company’s 401(k). A typical employer-sponsored 401(k) plan is required to have at least three investment options, but some will have a couple dozen. The average plan has between 8 and 12 investment alternatives. Still, this pales in comparison to the seemingly infinite options available on the open market. 

Utilizing an in-service rollover can be an effective way to gain both greater flexibility and more control over your investments, allowing you to tailor your investments to your long-term financial goals.

Outside Expertise

Not only does an in-service rollover give you access to greater investment opportunities, it also opens you up to outside expertise. With a 401(k) plan, the plan administrator is in control of all account transactions. They may offer some assistance with investment advice and financial planning, but it often comes from someone within your company or a third-party service you’re not allowed to vet or alter. This can make it difficult to trust your advisor and feel that they’re truly working for you.

Once your funds are transferred to an IRA, you will have full control. You can hire anyone to advise you or make trades on your behalf. This way you can take the time to find an advisor who makes you feel comfortable and provides the level of expertise you need.

Is an In-Service Rollover the Right Choice?

Before you transfer your 401(k), it’s important to consider your full financial picture. At Grace Wealth Management Group, we can help you make a confident decision. If you would like to learn more about in-service rollovers and how they can be used in your retirement plan, schedule an appointment here or call me at (949) 631-3840 x2 or email

About Jim Peters

Jim Peters is an independent financial advisor and the founder of Grace Wealth Management Group, Inc., a full-service financial firm committed to helping people pursue their financial goals. With more than 24 years of experience in the industry, Jim combines his extensive knowledge with his genuine interest in helping people pursue financial independence. Beyond his experience, he is certified as both a Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) professional, meaning he has advanced training and knowledge in financial planning and insurance. Based in Irvine, California, Jim specializes in working with individuals, families, and businesses throughout Orange County. To learn more, connect with Jim on LinkedIn or visit