Rollovers from a 401(k) plan to an IRA: Weigh these 7 factors first

cnbc.com:

Moving money from a 401(k) plan to an individual retirement account — an action commonly known as a "rollover" — may sound straightforward.

But the seemingly easy task has many pros and cons to consider before moving your money, according to financial advisors.

More people may be facing the choice than usual. You can generally only roll money from a 401(k) to an IRA in certain situations, like changing jobs or retiring. Americans are still quitting their jobs at an elevated rate, a pandemic-era labor trend that came be known as the Great Resignation.

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A new retirement law known as Secure 2.0 eliminated a big driver of rollovers to an IRA: Starting in 2024, investors with Roth 401(k) accounts won't have to take required minimum distributions. Because Roth IRAs don't require such distributions during an owner's lifetime, many 401(k) savers had rolled their Roth money to an IRA to avoid mandatory withdrawals, advisors said.

Savers may not have a choice, though: Some plans don't allow former employees to keep their money in the 401(k).

But there are numerous factors to weigh for those considering a rollover.

Investment fees are a big consideration for rollovers, advisors said.

Investment funds 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