If you are 59½ there are several reasons to consider an in-service withdraw, and a few reasons to avoid it. A few reasons to possibly consider using the in-service withdrawal are:
- You may be able to exercise more control over your investment options. Most employer sponsored plans have a limited lineup of options to choose from.
- You may be able to implement a more detailed retirement plan. Accumulation / saving is only one stage of retirement planning. Predicting and taking income is another. Tax planning is yet another. Using an in-service withdrawal to potentially implement an income plan could help make your retirement paycheck more predictable.
- Professional Advice. While you could engage a fee-based advisor to provide insights into your current 401K / retirement account, having the universe of strategies at your disposal would likely equip your advisor to provide you with a more customized portfolio based on your individual needs.
A few reasons to avoid the idea include:
- You’re not 59½.
- You plan on spending the money today for immediate expenses. Finding another funding source for immediate expenses is almost always a better idea if possible.
- You’re “doing it yourself.” Research shows a variety of survival instincts and biases that cause the individual investor to make emotional (read bad) decisions about their investments. One of the benefits with using the in-service withdrawal is to potentially get professional help managing your account. Having a financial planner on the team has been shown to have a positive overall impact on success. A study1 by Vanguard showed that investors that made their own decisions lagged benchmarks by 1.5%.
Conrad Slate, Rick Disharoon, and Will Parrish are Representatives with Cambridge Investment Research and may be reached at (865) 357-7370, by email or www.sdp-planning.com.
Email us at…
Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Slate, Disharoon, Parrish and Associates LLC are not affiliated.
1 Stephen M. Weber 2013. Most Vanguard IRA® investors shot par by staying the course 2008-2012.