This past week, we helped a San Ramon client complete an in-service 401(k) rollover to diversify his portfolio without triggering a tax bill.
Here’s how it worked:
Bob came to us with 75% of his portfolio in the S&P 500. To diversify, we had two options: trim his taxable holdings, which would have created a six-figure capital gain, or use his 401(k).
At Summit, we believe liquid alternatives like trend following and precious metals do the best job of diversifying an equity-heavy portfolio, and the research backs this up.
Like most 401(k)s, though, his plan offered no way to allocate to either one.
Once you reach age 59½, the government allows you to roll a 401(k) into an IRA while still working for the employer sponsoring the plan. This is called an in-service rollover.
Bob had just passed 59½, so this was a great fit. We rolled his 401(k) into a rollover IRA at Schwab and invested in the exact funds we wanted to diversify his portfolio.
This is just one of many creative ways we’ve been diversifying client accounts without creating a tax bill.
If your portfolio is overly concentrated in large-cap U.S. stocks and you’d like to explore creative ways to diversify, email me at nick@swrpteam.com.
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