Can my wife rollover her 401(k) to an IRA before she is 59.5 years old, even though has a disability retirement account?
My wife has a disability retirement account and a substantial 401(k) retirement account. Is it possible for her to roll over her 401(k) account to an IRA now, rather than leaving it alone until she is 59.5 years old, even though she already has a disability retirement account?
Your wife's opportunity to roll the 401(k) to an IRA depends on whether she is still employed by the plan sponsor (the company that offered the 401(k)) or if the plan allows for "in service" rollovers. It sounds as though you are saying that she is now receiving a disability income benefit, which may imply that she has left that employer; if your wife no longer works for the plan sponsor, she should have the option to roll the plan assets out to an IRA or other qualified retirement plan.
Whether your wife SHOULD roll her balance out to an IRA is a different question. It is worth taking some time to understand the relative costs, investment options, and other benefits of the one type of account versus the other before initiating the rollover.
If your wife is officially separated from the company, she can roll the 401k at any time to an IRA. Furthermore, she can take the money out of an IRA before 59 ½ without worrying about any tax penalty as the “disability” is one of the exceptions. However, as long as your wife continues to work with the same employer, she may not be able to roll her 401k yet. The best way to find out is to read her plan summary. Best!
Good question, but unfortunately there are some variables that can impact you. A direct rollover to an IRA is allowed, but only under certain guidelines, and a lot of that depends on the what the retirement plan itself allows. If your wife is no longer working then it's easy, and you can do a direct rollover. Most plans do allow for penalty-free withdrawals after age 55, but only if she is retiring early, and many also allow for hardship withdrawals or distribution after age 59 1/2 (which she isn't). If your wife is still working, ask her employer for the plan documents which they are required to have on file. You may certainly feel free to contact me with questions, but if you are being instructed by another advisor to move the 401(k) to an IRA then I think it's always worth getting a second opinion. Good luck to you.
Thank you for your question. I hope that I can give you a little guidance.
There should be no reason that you would not be able to make a rollover from your company 401k to your IRA. As long as it is Trustee to Trustee and its going into the correct accounts (Traditional 401k to Traditional IRA and Roth 401k to Roth IRA) you should be fine. In addition, she must have been separated from service from the employer offering the 401k. There are no age requirement to do this. As a matter of fact it often makes sense so that you keep everything in one place in lieu of having multiple statements.
Hope this helps.
Richard Reyes, CFP The Financial Quarterback TM
The answer to this question is largely dependent on some other factors, including the level of disability, plans for the IRA funds, and more. Has your wife separated from service at her company? All of these are factors that will affect the answer to this one. Feel free to contact us for a no-obligation consultation.