Workers aged 59½ or older can transfer 401(k) funds to IRAs without penalties while remaining employed, expanding investment options.
The IRS permits workers aged 59½ or older to roll over 401(k) funds into an IRA without penalties, even while still employed. This in-service rollover allows access to broader investment choices, including individual stocks, ETFs, and Treasuries yielding 4.69%, often unavailable in employer-sponsored plans.
Most 401(k) plans allow this rollover at 59½, though the feature is rarely advertised. The 10% early-withdrawal penalty under IRC §72(t) no longer applies, enabling penalty-free transfers while contributions and employer matches continue. However, rolling over company stock into an IRA may forfeit Net Unrealized Appreciation tax benefits and reduce federal creditor protections.
The option provides flexibility for workers seeking greater control over retirement assets without leaving their jobs or pausing contributions.