Can You Do a Rollover If You Haven't Changed Jobs?
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The automatic payroll deductions and matching contributions make it easy and appealing to stash cash into an employer’s retirement plan. However, once the money is in, it's not as easy to get it out if you're still working at the same company — even if you just want to roll it over into another retirement plan. The rules for moving your nest egg to greener pastures before you change jobs or retire vary between plans, so there isn’t a single answer for everyone.
Depending on where you work, your company might permit what's known as an "in-service withdrawal." This allows you to move money out of your 401(k) plan even before you leave your job. A quick call to your 401(k) plan administrator should tell you whether your plan permits these withdrawals. Your company might restrict how much you can take out of your account even if it does permit in-service withdrawals. On average, companies are much more likely to permit these withdrawals if you're age 59 1/2 or older.
In-Service Withdrawal Rollovers
If you're eligible for an in-service withdrawal, consider using a direct transfer to move your money rather than a rollover. With a direct transfer, you can tell your 401(k) plan administrator where to move the money, and it goes directly into the new account. If you take a distribution, the IRS gives you 60 days to place the money in another retirement account. If you miss that deadline, it's treated as a permanent distribution and you'll pay taxes. If you're under age 59 1/2, you'll also pay a 10-percent penalty.
SEP and SIMPLE IRAs
Some employers don't offer 401(k) or 403(b) plans, but rather savings incentive match plans such as IRAs, SIMPLE IRAs, simplified employee pension IRAs or SEP IRAs. These don't have the same restrictions on when you can move money to a different plan. The IRS prohibits employers from requiring you to keep the money in the plan for any period of time. SIMPLE IRAs do impose a 25-percent penalty if you take the money out — including to roll it over to another retirement plan — within two years of starting your account.
If you've been saving for your golden years without your employer's assistance, such as by investing in a traditional or Roth IRA, you're allowed to move that money to another qualified retirement plan regardless of your employment situation. If you're thinking about converting your traditional IRA to a Roth IRA, or if you're moving an IRA to a different financial institution in search of different investment options or lower fees, you won't have to quit your job in order to do so.