What Is An In-Service Distribution?

Shawn Plummer

CEO, The Annuity Expert

When planning for your financial future, you might consider an in-service distribution. But what exactly is an in-service distribution? How does it work? And what are the pros and cons of this approach? In this guide, we’ll take a closer look at this retirement planning strategy so that you can better understand whether it might be a good fit for your individual needs and goals.

What is an in-service distribution?

An in-service distribution is a retirement planning strategy that allows you to withdraw money from your employer-sponsored retirement plan, such as a 401(k). At the same time, you are still employed with that company. It can help diversify retirement income sources or give more control over retirement savings, which is especially important given the uncertain future of social security.

What Is An In-Service Distribution?

How does it differ from other distribution options?

An in-service distribution is unique because it allows you to withdraw money from your retirement account without retiring or reaching 59 and a half, typically when you become eligible for penalty-free withdrawals. Other distribution options, such as a rollover to an IRA, typically require leaving your current job before accessing your retirement savings.

How does it work?

You’ll need to meet specific eligibility requirements to take advantage of an in-service distribution. These may vary depending on your specific employer and retirement plan. Still, they often include factors such as your age, years of service, and the specific provisions of your retirement plan.

Eligibility requirements

Some plans may require you to have been with your employer for several years before you are eligible for an in-service distribution. Others may require you to meet specific age requirements, such as being at least 59 and a half years old. Therefore, it’s essential to carefully review your specific retirement plan documents to determine whether you meet the eligibility requirements for an in-service distribution.

Process for taking an in-service distribution

Suppose you do meet the eligibility requirements for an in-service distribution. Taking one typically involves filling out a request form or submitting a request to your plan administrator. You may also need to provide documentation to support your request, such as proof of age or years of service.

What are the pros and cons?

As with any retirement planning strategy, an in-service distribution has advantages and disadvantages. Let’s take a closer look at some of the key pros and cons.


One of the most significant advantages of an in-service distribution is that it allows you to diversify your retirement income sources. By taking money out of your employer-sponsored retirement plan and investing it elsewhere, you can potentially reduce your overall risk and increase your long-term returns. Additionally, an in-service distribution can give you more control over your retirement savings, which can be particularly beneficial if you have specific investment goals or preferences.


One of the most significant potential downsides to an in-service distribution is that it can impact your retirement savings in the long term. Depending on the specific provisions of your retirement plan, taking money out early could result in fees, taxes, or penalties. Additionally, you may miss out on potential growth and compounding over time if you withdraw significant money.

Next Steps

An in-service distribution can be a valuable retirement planning tool, but it’s essential to carefully weigh the pros and cons before deciding whether it’s right for you. By understanding the basics of how an in-service distribution works, as well as the potential advantages and disadvantages, you can make a more informed decision about how to manage your retirement savings best and plan for a financially secure future

In-Service Distribution

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Frequently Asked Questions

What are the advantages of taking an in-service distribution?

Tax-advantaged access to retirement savings without penalty or early withdrawal fees.

Who is eligible for an in-service distribution, and under what circumstances?

In what circumstances are in-service distributions available, and who is eligible?

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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