Case Study: Meet Dan
MEET DAN
A physician at 60 with $2,000,000 saved and five years from retirement, who thought his investment options were fixed. It turned out they were not.
Dan is a physician in his early 60s, with roughly five years left before he plans to retire who has done everything right. He has maxed out his 401(k) every year for decades. He earns well, spends thoughtfully, and has $2,000,000 saved heading into the final stretch of his career.
But for years, Dan had a quiet frustration he couldn't do much about.
The Challenge
Dan's income had always been too high to contribute to an IRA and receive a tax deduction. He knew that. So he did what made sense: he put everything into his 401(k), because at least those contributions reduced his taxable income.
The problem was the 401(k) menu. Like most employer-sponsored plans, his offered a limited lineup of institutional funds. Target date funds. Blended options. Nothing that reflected where he actually saw opportunity.
Meanwhile, Dan kept hearing the same conversations at dinner, at conferences, at the hospital. Colleagues talking about the technology shifts happening in artificial intelligence, semiconductors, data infrastructure. Friends who held individual positions in the companies driving those changes and were watching those investments perform. Dan was interested. He followed the news. He understood the themes.
But when he looked at his 401(k), none of that was available to him. He assumed it was just the trade-off for the tax benefit. You get the deduction, you give up the flexibility. He had accepted it.
What Dan did not know was that he didn't have to.
The Approach
A provision most people never think to ask about.
At age 59 and a half, most employer-sponsored 401(k) plans include a provision that allows participants to move some or all of their accumulated funds into an IRA while still actively employed. It is called an in-service rollover. When done correctly, there is no penalty and no taxable event. The money moves directly into the IRA, the tax-deferred status is preserved, and Dan could continue making contributions to his 401(k) going forward.
We identified this option during our review of his plan documents. Dan had never been told it existed.
What changed.
We rolled $2,000,000 from Dan's employer plan into an IRA. Before anything else, we made sure Dan understood exactly what this move did and did not mean. Three things he needed to hear:
No taxes. The rollover is a direct transfer from the 401(k) to the IRA. Because the money never passes through Dan's hands, it is not a taxable event. His tax-deferred status is fully preserved.
His 401(k) does not close. The in-service rollover does not affect his employer plan or his participation in it in any way. The account remains open.
He keeps contributing and keeps his match. Dan continued making contributions to his 401(k) every paycheck after the rollover, and his employer match continued exactly as before. Nothing about that relationship changed.
With that clear, we built an investment strategy in the IRA around his goals, his timeline, and the opportunities he had been watching from the sidelines for years:
A core allocation to broad, diversified index funds providing the stable foundation of the portfolio
A dedicated sleeve of individual stocks in the sectors and themes Dan had conviction in, the kinds of positions his 401(k) had never allowed him to hold
An overall structure designed around his five-year retirement timeline, balancing growth potential with the appropriate level of risk
His balance did not change on the day of the rollover. His options did.
The Results
For the first time, Dan's largest financial asset is invested the way he actually wants it to be. He is no longer watching opportunities from the outside. He has a portfolio that reflects his thinking, built around a strategy designed specifically for where he is in life.
The lever he thought he did not have was there the whole time. It just took someone looking at his plan to find it.
Dan is still working. He is still contributing to his 401(k). And he now has a retirement plan that is genuinely his.
If you're over 59 and a half and still working, there is a good chance no one has ever shown you this option. It's worth a conversation to find out if it applies to you.
Schedule yours today.
Disclosures
This case study is provided for illustrative purposes only to provide an example of the firm's process and methodology. The results portrayed are not representative of all client situations or experiences. An individual's experience may vary based on his or her individual circumstances and there can be no assurance that the firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the firm's investment advisory services. The information contained herein should not be construed as personalized investment advice. Past performance is not indicative of future results. References to specific investment themes or sectors are for illustrative purposes only and do not constitute a recommendation to buy or sell any security. Plan provisions vary by employer. Not all 401(k) plans allow in-service rollovers. Investors should review their plan documents and consult with a qualified tax or legal advisor before taking any action. The Pitti Group Wealth Management, LLC is a registered investment advisor. Advisory services are only offered to clients or prospective clients where The Pitti Group and its representatives are properly licensed or exempt from licensure.