As such, this passage seems to imply that Christians are now in the Kingdom of God. However, this clearly isn't the case, since 1 Corinthians 15:50 tells us that "flesh and blood [physical bodies] cannot inherit the kingdom of God."
Part of the confusion here comes from the meaning of the word kingdom. In addition to meaning a literal kingdom, the Greek word basileia, translated "kingdom," denotes sovereignty and royal power (Vine's Complete Expository Dictionary of Old and New Testament Words, "Kingdom").
This passage in Colossians shows that God's sovereignty and power begin in the life of the Christian at conversion. The New International Version Study Bible explains that in this verse the word kingdom "does not here refer to a territory but to the authority, rule or sovereign power of a king. Here it means that the Christian is no longer under the dominion of evil (darkness) but under the benevolent rule of God's Son."
Virtually all other occurrences of basileia, when referring to the Kingdom of God, point to the literal dominion that Christ will establish at His return (Matthew 6:33; Revelation 11:15). As "heirs of God" in training to inherit that future Kingdom (Romans 8:15-17; Matthew 25:34; Revelation 20:4-6), Christians are thus already subject to the sovereignty and authority of that Kingdom, although not yet residents of it.
Jesus Christ, ruler of the coming Kingdom, is the Lord and Master of Christians now (Philippians 2:9-11). God rules the lives of converted Christians who voluntarily obey Him and His laws. They submit themselves to God's basileia—His royal sovereignty and power. They individually are part of the Church, the Body of Christ, which God also rules. But the Church collectively looks to God's coming world rule when the basileia will be fully established.
The context leading up to Colossians 1:13 also helps clarify the meaning. Colossians 1:9 begins a description of points Paul and Timothy regularly included in their prayers. One of the blessings they were thankful for was that God had qualified them and the other members to receive the inheritance of the saints (Colossians 1:12). That inheritance, eternal life, does not come until Christ returns (1 Corinthians 15:50-52; Romans 8:17). This is why the Bible refers to the saints as heirs of the Kingdom (James 2:5).
Colossians 1:13 continues this theme, adding that those qualified as heirs, those whose status had changed from nonheirs to heirs, were also "translated," or transferred, from the power of darkness to the Kingdom of God.
We, as modern-day saints, also exchange systems of government when we are converted. We now give our allegiance and obedience to the Kingdom of God, even though that Kingdom has not yet fully come.
In 2 Corinthians 5:20, Paul uses a different comparison to help us understand this, calling us "ambassadors." An ambassador is one who represents a kingdom or other government, but resides in a different land. Christians are thus ambassadors for God's Kingdom, representing His way of life in our current earthly situation and age in which we reside. We are not yet in the Kingdom of God.