Thinking About Rolling Over Your 401k?

An increasing number of employers offer 401(k) plans for their employees. It’s estimated that the average employee will have 10 jobs before they hit 40 years old. This means that there are millions of 401(k) accounts that are essentially orphans. Most companies will allow former employees to leave the money alone, and 22% leave their money with their old employers. However, you might want to consider rolling over your 401(k) to your new employer’s plan or an IRA. 

Check Fees

Fees and expenses are one of the most important issues you’ll want to consider before rolling your 401(k) over. If your new employer has a plan with options that charge lower fees, it might be a good idea to consider rolling your money into the new plan. Small plans can charge average fees of more than 1.4% on their employees’ investments. If you’re paying more than 0.50%, you might want to consider a rollover. You can move your money over to your new employer’s plan or an IRA. If your new employer has higher fees, you should carefully consider whether you should leave your money alone or roll it over into an IRA. 

Investing Options

Another consideration that you’ll want to take into account when deciding what to do with your IRA is the number and the quality of the investing options. Some smaller employers may have fewer options for their employees. If you’re leaving an employer with a roster of proprietary funds, you might want to consider rolling your money over into a new account. Many employers are also offering more affordable options like index funds. 


Deciding upon whether you want to invest your old retirement savings through a new employer’s 401(k) or a rollover IRA can sometimes depend upon the level of control you have over your savings. Many employers have a relatively low number of options in their retirement plans. With an IRA, you can have nearly unlimited investing options. If you want to invest in ordinary stock or bond funds, you can do so with an IRA. You can also use an IRA to make investments in other asset classes. You could buy a house to flip with an IRA. You can also hold physical gold in an IRA. 

More Tax Options

 Many times, leaving your money in a 401(k) can be a good idea, but there are also situations in which you’ll want to roll your money over. Your decision will depend upon your particular situation. You’ll want to ask questions related to the fees and the choices that are tied to each plan. You’ll also want to take your current tax situation into account so that you can make an informed decision that will work best for you in the long run.  There are several choices investors have when rolling over money from one plan to another. Since each choice has its own implications, it is recommended that you discuss and compare all potential fees, expenses, commissions, taxes, and legal ramifications with your qualified advisor before making a rollover decision.

February 11, 2020

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