Some 401(k) Plans Offer a Hidden Escape Hatch
More than one person has said to me, "Why do I have to be locked into this lousy 401(k) plan? The investment choices are terrible!" Check the fine print of your 401(k) plan. There might be a way out.
If there is, you will find it in the "Summary Plan Description," a document you should get at sign-up time, that describes what your plan is all about and how it works. The wording you're looking for is "in-service, nonhardship withdrawals." In other words, you still work for the company, but you want to take some money out, and not because of hardship.
Among your reasons for wanting out may be the desire for more control over your retirement money, more diversification in your retirement portfolio, the ability to choose from a broader universe of investments or the desire to own less of your company's stock.
Please note, we're not talking here about a distribution or withdrawal from the plan, even though the wording says "withdrawal." We're talking about a direct rollover from the 401(k) into another retirement plan, such as an IRA. These rollovers usually occur only if you leave your job and want to take your 401(k) assets with you. But "in-service" withdrawals don't require you to quit your job.The ability to make this kind of rollover is neither required nor prevented by the Internal Revenue Service or the Department of Labor. But you probably won't find it in more recent 401(k) plans. Plans that allow it are typically offered by older and larger companies that are able to offer customized, more feature-laden 401(k) plans to their employees. Among companies that offer in-service, nonhardship withdrawals are:
- Lucent Technologies
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