What is a 401(k) in-service distribution and when am I eligible for one?

An in-service distribution lets you take money out of your 401(k) while still employed there, without leaving your job. Availability depends entirely on your plan's rules. Many plans allow in-service distributions of after-tax or rollover-source money at any age, and some permit distribution of employer or pre-tax funds once you reach age 59 1/2.

People use in-service distributions to roll funds into an IRA for more investment choices, or to execute an in-plan Roth conversion. Taking a pre-tax in-service distribution before 59 1/2 that is not rolled over triggers income tax and a 10% penalty, so most people pair it with a direct rollover. Check your summary plan description or ask HR exactly which money sources and ages qualify in your plan.