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How To Withdraw Retirement Funds: In-Service 401(k) Distributions - YouTube
Channel: Liz Hand
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Is it a good idea to take an in-service
distribution from your 401k? Well let's
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discuss it. Hey there and welcome back to
my channel! Maybe you're thinking about
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taking an in-service distribution
because somebody in your office said
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that they did and it helped them
accomplish X Y or Z, or possibly your
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financial advisor has encouraged you to
look at an in-service distribution, or
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possibly you have this purchase in mind
and you see this beautiful 401k nest egg
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that you would like to tap into and
you're wondering, "is it a good idea?" Well
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that's what we're gonna discuss in this
video today. But before we get into that
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I invite you to subscribe to this
channel. This the Happiness IRA and on
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this channel we talk about all things
money and retirement focused. The
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conversation that we have today is going
to be generalized in nature and that is
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because every single 401k is unique.
There are some general principles that
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are attached to 401ks but then each
individual plan sponsor decides on some
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of the specifics about plan
distributions. The first thing that you
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need to find is your summary plan
description. SPD for short. This should be
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found online. The SPD shows you exactly
the rules of your plan. Are you even
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allowed to take an in-service
distribution? Well that's something you
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need to find out. Now that you've found
your SPD and you know if you are
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actually eligible to take an in-service
distribution there are a couple of
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things that you will want to weigh the
pros and cons of. The first is fees. In a
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401k we are working with a bunch of
other people that are saving into that
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401k therefore as a group you're working
towards discounts. With your advisory fee
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it's a lot easier to reach those
discounts in a group setting than it is
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to on your own. It might be that the fees
are a crucial piece of your decision, it
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might be that you decide in spite of the
fees, I'm going to take money out of the
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401k and put it into this product. The
second consideration is advice at a 401k
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the advisor that comes to advise you is
only able to educate you
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on the plan specific information. They're
not able to give you individualized
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advice because they're always working in
the best interest of the company. That is
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who hired them. Now oftentimes when we
have that 401k you might have online
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access financial planning tools that you
can go in and fill out the information
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or even call a helpline to help walk you
through what your financial plan is. But
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it still can feel a little bit sterile
for some people. And so sometimes people
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don't prefer that method. They want to go
and get their individual advice. You can
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always pay for that advice out of pocket
but sometimes people still want to take
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an in-service distribution from their
401k, transfer it to an advisor, in order
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to access that advisors advice letting
their investments pay the advisor
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rather than cutting the advisor a check.
A third consideration that you will want
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to look at is what product you are
jumping to. Your 401k has a set lineup of
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investment funds and typically those
investment funds will be well
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diversified that you can achieve your
standard goals,
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mostly accumulation goals. However
sometimes people want to take money out
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of a 401k in order to purchase a product
that helps them plan their retirement
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income. That can make sense so long as
there is not a product or a fund that
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meets that same goal on the 401k
platform (because as I mentioned before
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typically that 401k platform is going to
be less expensive than you using an IRA).
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The final thing I wanted to discuss is
when we take money from our 401k as an
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in-service distribution and use it for a
different reason... that 401k is the
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ultimate nest egg for most Americans
that helps create their retirement
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income after Social Security. So if we're
robbing it you want to make sure you
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recognize what you are giving up. Is that
going to extend the number of years that
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you have to be working? Is that going to
extend the amount that you need to keep
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saving into your plan? Alright friends,
that's all I have for today. Thank you so
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much for tuning in. I appreciate it as
always! So is taking money from your 401k
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as an in-service distribution a good
idea? I hope you recognize from this
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video that the big answer is it depends and take your time to do... to weigh
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both sides the pros and cons of doing it.
Whether that's the fees, the advice, the
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products available, or how it could
possibly short-change your retirement. You
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need to go in with that to that decision
with eyes wide open and with a plan in
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mind of how you're going to achieve what
you need to get done. So with all of that
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information I will leave you, and you
take care.
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