Investing Specialists

2 Ways to Upgrade Your 401(k) Without Leaving Your Job

Christine Benz

Most investors who participate in company-sponsored retirement plans know that leaving their workplace retirement plans--either because they've gone on to a new job or retired--opens up a world of opportunities. They can roll their company retirement plan assets into an IRA, taking advantage of more or better investment options. (Of course, venturing beyond the 401(k) menu's options can also invite trouble.) They can even convert some of their traditional 401(k) assets to Roth IRA assets at the time of rollover. Such conversions trigger income taxes, of course, but the benefit is the ability to take tax-free withdrawals on the Roth assets in retirement.

But employees may not have to wait until they retire or leave the firm to be able to make improvements to their 401(k)s. If their plans offer what's called an "in-service distribution," they can move a portion of their money from the company retirement plan to an IRA even as they remain with the same employer. Additionally, some company retirement plans offer an "in-plan conversion," which gives employees the chance to convert traditional 401(k) assets to Roth 401(k) assets within the confines of the same plan.