An In-Service Plan Rollover involves moving retirement funds from an employer-sponsored plan, like a 401(k), to an Individual Retirement Account (IRA) or ROTH IRA while still employed. This is not available in all plans, so it's crucial to verify your plan's provisions.

Key Benefits and Why You May Consider This:

1. Expanded Investment Choices: IRAs often provide a broader range of investment options compared to employer-sponsored plans, offering more flexibility in how retirement savings are invested. 
   
   
   1. We have many clients who have used this to roll funds into a pre tax or ROTH IRA and then self direct it (check our our SDIRA guide) into real estate or startups!
      
      
2. Potential for Better Management: Rolling over to an IRA can open doors to more sophisticated investment strategies and professional management services not available in the 401(k) plan, including private deals and private equity. 
   
   
3. Circumventing Roth IRA Rules: High earners, who are otherwise restricted from contributing directly to a Roth IRA due to income thresholds, can use the In-Service Plan Rollover to move funds from a ROTH 401K to a ROTH IRA and then self direct the ROTH into anything you want.
   
   

• You need to check with your plan Admin to discuss the ability to rollover the earnings
  
  
• In 2024, we actually have a method to get $66k into a self directed ROTH IRA for a Solo 401k plan owner...Contact us for more specifics on this.
  
  

For example, if you contributed $23,000 to a ROTH 401k through a Solo-K or 401k plan in 2024, you could rollover all $23k to a ROTH IRA and then self direct this!  

Normally, you could only get $7k into a ROTH via a direct or backdoor method.  This can be a homerun for those looking to juice up their SDIRA portfolio. 

Consider Jordan, a 45-year-old entrepreneur who has been contributing to a Roth 401(k) through their employer. 
Jordan wants to transfer a portion of these funds to a self-directed Roth IRA for more diverse and personalized investment options.

Steps to Perform an In-Service Rollover

1. Check Plan Eligibility: Jordan first needs to check with the employer or plan administrator to ensure that the Roth 401(k) plan allows for in-service rollovers. Not all plans permit this, and some may have specific criteria or age restrictions.
   
   
2. Open a Self-Directed Roth IRA (if you do not have one): If the plan allows for in-service rollovers, Jordan should then open a self-directed Roth IRA with a brokerage or financial institution that offers a wide range of investment options, including those not typically found in a Roth 401(k), such as real estate, precious metals, or private businesses.
   
   
3. Request a Rollover: Jordan will request a direct rollover from the Roth 401(k) to the new Roth IRA. This is typically done by filling out a rollover request form provided by the plan administrator. It's crucial that Jordan opts for a direct rollover to avoid any tax implications and penalties.
   
   
4. Transfer Funds: The funds from Jordan's Roth 401(k) will be directly transferred to the self-directed Roth IRA. No taxes will be due on this transfer since it is moving from one Roth account to another.
   
   
5. Invest as Desired: Once the funds are in the self-directed Roth IRA, Jordan can start investing in in startups, crypto, real estate and MORE which would NOT have been possible in the employer sponsored plan.
   
   
6. Maintain Records: Jordan should keep detailed records of the rollover and all investments made within the self-directed Roth IRA for tax purposes and future reference.
   
   

While this seems like a complex move, multiple Anomaly clients have executed this.  We do NOT recommend doing this unless you have a strong desire to Self Direct your retirement as the main benefit is the increased control outside of the limited choices an employer sponsored plan offers.

Questions?  Drop us a note!