An “In-service Withdrawal” in the context of the 401k industry is a provision that allows an employee to take a withdrawal from their 401k account while still employed with the company. This is different from typical withdrawals that are allowed after an employee has left the company, retired, or reached a certain age (typically 59.5 years).

The specific rules regarding in-service withdrawals can vary depending on the details of the company’s 401k plan. Some plans may allow for in-service withdrawals only after a certain age, such as 59.5 or 55. Other plans may allow in-service withdrawals for specific reasons, such as financial hardship or for the purchase of a first home.

It’s important to note that in-service withdrawals could be subject to income taxes and potentially an additional 10% early withdrawal penalty if the individual is under 59.5 years old. Additionally, taking an in-service withdrawal reduces the amount of money that can grow tax-deferred in the 401k, which can have a substantial impact on long-term retirement savings. As such, in-service withdrawals are generally recommended only in specific situations and after careful consideration.