Unlocking Your 401(k)'s Investment Potential After Age 59½

By: Elias Park, CFP®, CRPC®

Turning 59½ is a big milestone for many professionals—it means you can access your 401(k) or 403(b) without the 10% early withdrawal penalty. But what many don’t realize is that it also opens the door to rolling over part or all of your 401(k) into an IRA, giving you far more investment options and control.

Key Takeaways 

• Turning 59½ unlocks access to your 401(k) without penalties. 
• In-service rollovers give you more investment flexibility.
• IRAs offer greater diversification than most 401(k) plan fund options. 
• You can better balance growth and protection outside of 401(k) plans.

The Power of In-Service Withdrawals 

An in-service withdrawal lets you roll over a portion—or all—of your 401(k) into an IRA while you're still employed. Unlike waiting until full retirement, this option gives you earlier access to more flexible financial tools.

Once you hit age 59½, the IRS rules allow you to take penalty-free withdrawals from your retirement accounts. That’s the green light for making an in-service rollover without tax consequences, as long as it's handled properly

 Looking Beyond Target Date Funds 

Especially those approaching retirement, target date funds are oftentimes considered the safest option, but their low returns often lag behind inflation. Many IRA strategies provide principal protection while targeting higher returns. A diversified strategy can preserve your capital and generate better long-term outcomes.

Not sure what funds or strategies to use outside your 401(k) plan? Click here for a FREE Financial Wellness Assessment. 

Diversification Matters 

The in-service withdrawal can help offer thousands of investment options. With an IRA, you’re not stuck with a limited menu. 

You can invest in:

• Individual stocks
• Exchange-Traded Funds (ETFs)
• Corporate and municipal bonds
• Annuities
• Mutual funds
• Structured Notes
• Commodities

The more diversified your assets, oftentimes it can be less likely you’ll experience wild swings in your account value, something important to keep in mind when you’re only a few years to retirement. 

Balancing Risk and Growth 

As you near retirement, balancing risk and growth becomes more important than ever. Rolling over your 401(k) to an IRA can help provide greater control and flexibility to manage that balance effectively. Unlike the limited options within most 401(k) plans, an IRA opens the door to a wider range of investment strategies tailored to your specific risk tolerance and retirement timeline. 

You also may be able to implement more structured income strategies, tax-efficient withdrawal strategies, and even coordinate legacy planning to ensure your wealth is transferred according to your wishes. With professional guidance via RetireUS, an IRA rollover helps you protect what you’ve earned—while still positioning your portfolio for long-term growth and stability in retirement.

Conclusion 

If you’re over 59½ and haven’t explored an in-service rollover, you may be limiting your potential. More options mean more control and better retirement outcomes.

Sources:

• https://www.irs.gov/retirement-plans/retirement-topics-tax-on-early-distributions 
• https://www.investor.gov/introduction-investing 

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