Moving Retirement Funds to a Solo 401k or ROBS 401k While Still Working

Whether you are looking to invest your retirement funds in real estate or to finance your own business, If you are still working for the company that sponsors the full-time employer 401k plan, you may not be able to transfer that 401k unless one of the following triggering events are met:

  • Reaching retirement age. This is usually defined by the plan, and typically ranges from age 55 to 65; however, the actual retirement age may vary among plans. As such, the plan must be consulted to determine its particular requirements and definitions.
  • Termination of employment
  • Disability
  • Termination of the plan
  • Death, in which case the distribution would be taken by the beneficiary

However, some current employers may allow for partial or full-transfers from 401k and profit sharing plans even if one of the aforementioned triggering events have not been satisfied. These are referred to as in-service withdrawals. Key factors should be considered when making in-service withdrawals. These include the following:

  • In-service withdrawals are not permitted from pension plans, such as money purchase and defined benefit pension plans.
  • In-service withdrawals that are due to hardship cannot be rolled over to an IRA or any other retirement plan such as a solo 401k plan or a ROBS 401k.
  • In-service withdrawals of salary deferral amounts are usually permitted only under hardship circumstances, whereas in-service withdrawals of employer contributions need not be limited to hardship.
  • Withdrawals cannot be more than the participant’s vested account balance, and for participants who have participated in the plan for less than five years, their in-service withdrawal amounts can be further limited to amounts that have been in the plan for two-years or less.

Get a copy of the Current Employer SPD

One way of determining if your current employer will allow you access your retirement funds while still working for them, is to check the summary plan description (SPD) for the existing plan. The SPD is required to be written in a language or format that is easily understood by participants. Larger plans usually make the SPD available on the company’s benefits website. If the SPD is not available, the plan administrator or human resources department should be contacted for a copy of the most updated version.

Fidelity and Vanguard 401k transfer QUESTION:

I’m in my current employer’s 401K plan ( at fidelity ), and also have a 401K with vanguard ( courtesy of my prev. employer ).
For a real-estate construction project, can i open up a solo 401K, and transfer/rollover my current, as well as previous 401K, without doing a distribution ( do not want to have a tax implication ) ?

ANSWER:

In order to open a solo 401k you mus be be performing self-employment activity. See the following: https://www.mysolo401k.net/am-i-self-employed/

The rules allow for the transfer of a former employer 401(k) to Solo 401k. However, because you are still working for the employer that offers the current 401k plan, they most likely won’t allow you to transfer those funds until you stop working for them or until you reach age 59 1/2. To learn more see above.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 18 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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