Can you rollover a 401k to an IRA without leaving your job?

Question

Just wondering if it was possible to do this. It would definitely be great to sock away the money in the 401k, get the match, and then roll it to an IRA where I could actually get some decent investment options.

So, does the IRS promote sound investing (let you roll over and make your own choices) or job instability (quit jobs as frequently as possible to be able to put your money where you want it)?

Thanks.

Answer 1

I always wondered about that, because when I got laid off a few years ago, I rolled my 401K into an IRA where I have very flexible choices.  My new 401K has fairly limited choices (most of them are bad) but I cannot withdraw funds, unless it is a "loan" (which has to be paid back). I suspect that is typical.  But if I get laid off again, I can roll the new one over, too. 8-)

Government regulations often have unintended consequences.   When you reward certain behavior, you get more of it.

Answer 2

It depends.  There are two types of withdrawals from a 401(k) while someone works there.  First, hardship withdrawals - this does not apply to your question.  Second, in-service non-hardship withdrawals.  You can take as a withdrawal - not a rollover - your contributions as wells as the companies money and place it into an IRA without any IRS penalty or taxes.  Sounds great!  But, before you can do this a few requirements.  The 401k plan must allow this type of withdrawal.  Then, if they do - you must meet the retirement age for the plan (usually 60 years old.) Lastly, you must be vested to take the company's money.  If all are yes then you can take all or some of your money out and place it into an IRA.

Answer 3

ERISA law dictates what you can and can't do in a 401k.  ERISA does not allow you to rollover any contributions that YOU have made to a 401k.  It does not specify anything about matches, profit sharing, or any other employer contributions however most employers aren't too keen on someone taking their money and rolling it out of the plan (if they wanted you to have the cash they would have simply paid you a higher salary!) so they a) make you vest in it over time and b) specifically do not allow for in-service distributions until age 59 1/2 except for cases of hardship (which are not eligible to be rolled over either).

These rules promote sound SAVINGS and stability.  Anyone who quits a job as frequently as possible to  be able to put money where they want it is not likely to increase earnings potential much and probably is not likely to be making sound investment choices either.   Additionally,  I've had a few clients run into people who quit just to get at their money and they refused to rehire even though they were finding it difficult to replace the employee who quit.   Of course the employee didn't count on that when they quit....  

If investment choices are so bad in your 401k then do the research and present better options to your employer.   In most cases you'll find that your options really aren't that bad.  And, if they are most employers are willing to change if it's not too expensive or labor intensive for them.

Answer 4

No, not generally.

No.

and No.

That's your government at work.