Deciding whether to transfer your old 401(k) into a new IRA? Use this overview of the key pros and cons to figure out whether it’s right for you.
While some employers let you keep your 401(k) account after leaving, it can be hard to keep track of what your savings are doing. Accessing your old HR / 401(k) portal can be a hassle, and your old HR department doesn’t have the same incentive to help you once you’re no longer an employee. With an IRA you always have access on your own, and the IRA will stay with you throughout your career.
Unlike a 401(k) where the company chooses the provider for you, you actually get to pick which institution to have your IRA at. So if a seamless digital experience is important to you, you can pick one of the many digital advisors that offer IRAs. If you want a brand-name institution, you can pick one of those too.
Excessive fees can erode your savings and make it harder to prepare for retirement. Unfortunately some 401(k) providers have high fees and make it hard to even figure out what your fees are. While some IRA providers can do the same, it’s generally easy to see what fees you’ll be paying before opening up an IRA. Rolling over your 401(k) is a good chance to make sure your assets aren’t being drained by hidden fees.
Money that’s saved in an IRA grows tax-free until you retire – just the same as your 401(k) plan. You can also make ongoing contributions to an IRA if you choose. Because of this an IRA allows you to keep saving for retirement in a tax-effective way.
We feel you. If you’d rather get poked in the eye with a sharp needle than think about your retirement accounts, trust us, you’re not alone. It can seem like a hassle. But the reality is that it doesn’t really take much work to initiate a rollover. Part of our mission to help people complete their 401(k) rollovers quickly. We can help manage your rollover for free or contact us if you need step-by-step support.
If you really liked your old 401(k) account and you’re confident the investments in it are right for you, then doing a rollover may not be worth it. Just keep in mind that you’ll have to keep track of your 401(k) assets as you move throughout your career which can be difficult. You’ll also need to periodically check that your old employer keeps the same 401(k) provider. And double check to make sure your existing 401(k) fees are reasonable.