Millions of people move money from a workplace 401(k) plan to an individual retirement account each year.
Such "rollovers" are common when workers retire or take new jobs at different employers. More than 5.6 million people rolled a combined $618 billion into IRAs in 2020, according to the latest available IRS data.
A rollover may be «the single largest transaction» many people make in their life, Fred Reish, a retirement expert and partner at law firm Faegre Drinker Biddle & Reath, recently told CNBC.
But deciding whether a rollover makes sense isn't always straightforward: There are many factors to consider before moving the money. The Department of Labor recently proposed a regulation to improve the rollover advice investors get from brokers, insurance agents and others.
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Of course, not all savers will have a choice: Some 401(k) plans don't allow former employees to keep their money in the workplace plan, especially if they have a small balance.
Here are some key details to weigh when choosing to keep money in your 401(k) or move it to an IRA.
Investment fees are a big consideration for rollovers, financial advisors said.
Investment funds held in 401(k) plans are generally less costly than their IRA counterparts.
That's largely because IRA investors are «retail» investors while 401(k) savers often get access to more favorable «institutional» pricing. Employers pool workers into one retirement plan and have more buying power; those economies of scale generally yield cheaper annual investment fees.
Rollovers to an IRA made in 2018 will cost investors
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