Annuity123 is dedicated to providing Americans with unbiased information about retirement, answering the tough questions you want to know.

With hundreds of articles on every retirement planning topic you can think of, peace of mind is just a click away.

Can I Take Money Out Of My 401(K) And Put It Into An Annuity When I Am Still Working?

Laura Johnson

As you near retirement, your nest egg is even more sensitive to market volatility and potential loss of your hard earned savings. In fact, the US Federal Reserve released figures showing that the median US household net worth dropped 39% between 2007 and 2010, reducing 18 years of prior gains. If you were already retired and taking income from your nest egg, the devastation was even worse if you were exposed to the ever-changing stock-market.

Many 401(k)s and other retirement plans offer fund options that can provide safety, but they do so at the expense of growth potential.

More investors are now familiar with the idea of Fixed Index Annuities that can protect your principal from any market loss, but still participate in market gains. Few employee sponsored plans offer annuities as a fund alternative, and if they do, it is very limited with the rate option guarantees.

There is a choice on most 401(k) and other retirement plans that allow in service withdrawals as a rollover while still continuing to participate in the plan. The rollover is penalty and tax free if you roll it to a personal annuity IRA.

According to a recent study done by consulting firm Aon Hewitt, 90 percent of defined contribution plans including 401(k)s allow in-service withdrawals. An in-service withdrawal allows active employees – typically age 59 and a half and older – to initiate a direct rollover of funds from a qualified plan into an independent retirement account (IRA) without incurring any taxes or penalties. Although the tax codes generally allow such rollovers, some plans can impose more restrictive codes.

The tax code permits the following types of funds to be rolled over to an IRA:

  • Employer matching and profit sharing contributions
  • Employee after-tax contributions (non-Roth)
  • Employee pre-tax and Roth contributions after age 59 and a half.

It is also important to note that some companies allow employees to rollover their retirement plans before reaching age 59 and a half as well.

To learn more from this educator, click here (Laura Johnson).

About the Author:

Laura Johnson is a well-known advisor in the greater Tampa Bay area and has been featured on the national Tom O’Brian show. She specializes in all aspects of retirement including Wealth Transfer and Preservation, Retirement Income Planning, Annuities, Medicare Options, Social Security Strategies, Long Term Care and Life Insurance.

Call now for a complementary review and consultation (813) 569-9222 or email to


Annuity123 does not offer insurance, investment, or tax advice.  You should always seek the guidance of qualified and licensed professionals concerning your personal insurance, investment, or tax matters.  Annuity123 is simply a platform allowing retirement planning professionals to help educate the community on various retirement planning topics.  Annuity123 does not directly support or take responsibility for ensuring the accuracy of the content displayed in the articles themselves or any feedback that may get added in the Comments section from the community.


  • Some 401(k)s allow In Service rollovers and some don't. If yours does, consider your tolerance for risk and your age, can you afford another down turn in the market. If you are young, i.e. has 10 or 12 years to retirement, you may have time for any losses to recover. If you are near retirement review the many Indexed Fixed Annuities. Its all about you and how you feel.

  • Mike McShea says:

    Laura, Thanks for providing comprehensive education for prospective retirees. My only suggestion would be to encourage this education process for younger employees. MANY years ago my management had requested that I initiate pre-retirement classes for our employees age 55 or older. After doing this for several months I opened the classes to ALL employees. I was thrilled when one of my 18-year old clerks showed up! She was going to benefit far more than somebody only five or ten years from retirement.

Leave a Reply

Your email address will not be published. Required fields are marked *