If I do an in-service withdrawal, where should I put those funds?
A financial advisor told me that a variable annuity is a good option, but not for me. Where should I put my in-service withdrawal? What is the max amount allowed in a 401(k) per year?
It sounds like you are trying to pull funds from your 401k to find better investment options elsewhere? Good call avoiding the annuity- sounds like someone was giving some Non Fiduciary Financial Advice to make a commission.
You may be able to find other better investment options - with lower fees etc- outside of your work plan. Beware most plans won't allow you to contribute for 6 months after an in-service withdrawal. So if you are trying to stay on track for retirement you man need to do a little planning ahead.
First step would be to see if you can re-allocate within your existing 401k- that is usually the easiest option if not the best.
I personally hate variable annuities and don't use them. If you're company's plan offers an in-service withdrawal, they will be able to tell you how much you can rollover into either a Roth or regular IRA account at any brokerage firm. We use Schwab for our clients and are happy with their platform.
Keep in mind, variable annuities are much more expensive than ETFs, lock you in for a period of time, and pay advisors a big commission. I prefer to have liquid assets for my clients and manage an active investment strategy. There is no need for my clients to have a variable annuity!
You should only do an in-sevice withdrawal if the grass is indeed greener on the other side. What are the pros and cons the adviser listed for both options, i.e. simply staying put vs. the withdrawal? Lower fees? Less volatility? More investment choices? Annuity rider benefits like guaranteed income and/or long term care? If the alternatives to staying put aren't clearly superior, then stay put.
An in-service withdrawal means you take a portion of your 401k while you still work with the same employer. There’s no uniform rule for it: some employers allow it, while others do not. If you take the money out of a tax-deferred account, you could be facing the normal tax as well as the 10% early withdrawal penalty tax, if you’re under 59 ½. Thus, before making such a drastic action, think what prompted you to consider this option. If you think the investment menu in a 401k is too narrow or underlining funds cost too much, a target-date fund or a balanced fund may be a one-stop solution for your needs.
On the other hand, taking the savings out of a tax-advantaged account and putting in a variable annuity could be a huge mistake. Yes, both vehicles (annuity and 401k) offer the tax advantage, but you will be facing more possible penalties (surrender charge, penalty tax, etc.) from the annuity than a retirement plan.
Lastly, the max annual 401k contribution is set by IRS every year. For 2017, you can defer $18k ($24k if age 50+) to your 401k account. Next year, 2018, it will be $18,500 for the salary deferral ($24,500 age 50+). Best!
First, why are you doing an in-service withdrawal? Is it on the advice of an annuity salesman or to spend on essential expenses?
Taking money out of a 401(k) and putting into an annutiy is terrible advice (which I think you already recognize). It moves money from a likely lower-cost company plan to a nearly-always much higher expense insurance product.
If you must take an in-service withdrawal, move the money directly to a Rollover IRA with a discount broker. This will avoid tax penalties and allow you to invest in low cost products.
In 2018 you can contribute $18,500 or $24,500 if you are aged 50 or over to at 401(k).