Top 10 Reasons to Rollover Your 401k into an IRA

If you have a 401(k), you know how difficult it can be to manage it and keep up with your account. If you’ve worked a couple different jobs over the course of your career, you probably have a couple different...

If you have a 401(k), you know how difficult it can be to manage it and keep up with your account. If you’ve worked a couple different jobs over the course of your career, you probably have a couple different 401(k) accounts, which means it’s even more complicated to manage. In order to simplify your accounts and make them easier to understand, you can rollover your 401(k) accounts into an IRA.

There are a lot of benefits to doing so and all of them will help you set yourself up better for your retirement. Below are twelve reasons why you should consider rolling over your 401(k) accounts into an IRA.

Lower Fees

Over the course of time, you’ll find that your 401(k) plan cuts into your investment returns considerably due to the administrative fees associated with the plan. If you choose to rollover your money into an IRA, then you’ll save money because you won’t have to pay the administrative fees. And you’ll save even more money if you happen to not sign up for investment management with a broker. Additionally, there are some 401(k) plans that will charge you an extra fee to manage your plan once you are no longer an employee of the company, so make sure you check to see if this is the case for you.

More Investment Opportunities

With your 401(k) plan, you are given minimal options when it comes to investing, since you are most likely limited to just a small choice of a couple different mutual fund. When you choose to rollover into an IRA, you’ll find that most investment opportunities are now open to you! You can still invest in mutual funds, but now you can also invest in individual stocks and exchange-traded stocks to name a few! The more options you have to invest, the better chance you’re going to have a stronger plan for your retirement.

Fewer Rules

I think this comes as no surprise to anyone reading this, but understanding and comprehending exactly what your 401(k) means can be incredibly difficult and complicated. Each company that sets up a 401(k) has a lot of leeway in how they set it up and what rules they choose to follow. With an IRA, every single one is standardized by the IRS. This means that an IRA with one broker is probably going to follow the same rules as an IRA with another broker. This makes it a lot easier to understand your plan and know exactly what it means.

Rollover Is Free

Obviously there are going to be costs to consider no matter what you choose to do, but for the initial rollover from a 401(k) to an IRA, there are no fees.

Everything In One Place

I can tell you right now, this is one of the best reasons for considering rolling over your 401(k). If you rollover your funds into one mutual fund firm, you are able to combine your funds along with your significant other’s funds, so you can see your entire financial snapshot in one place. When you do this, it makes rebalancing a lot easier because everything is in one place, which means you can see all you need and you can adjust accordingly. Rebalancing is incredibly important as it allows you to determine how much money you want in stocks, bonds and alternatives based on your age and the risk you want to take. Because this changes every year, it’s essential to rebalance on a yearly basis, and as a result, having all of your stuff in one place will make that even easier to do.

Better Investment Choices

As it was briefly mentioned earlier, you will get a lot of better investing options when you choose to rollover your 401(k) into an IRA. Most 401(k) plans have very minimal investing opportunities and most of the investing is of the high fee and high expense variety, so it isn’t exactly an ideal investment opportunity. By rolling your money over into an IRA, you’ll be able to invest in anything you want to invest in. One of the more preferred options is investing in individual stocks, and with an IRA, that is easy to do!

401(k) Changes

As unfortunate as it is, everything with your 401(k) can change rather quickly. Whether it be the investment choices or the fees, often times the plan can change without you knowing, especially if you no longer work for the company. When big changes are in order for the 401(k), there will usually be some sort of meeting or informational packet sent out to employees so they know about it, but when you no longer work there, odds are these changes occur without you knowing, and that might not end well for you. You’ll have to pay close attention to your 401(k) statements in order to see these changes, and even then, there’s still no guarantee you’ll notice it before they take effect.

Employer Stock

Believe it or not, there are still a large number employees that keep a big portion of their 401(k) invested in their employer’s stock. A lot of time, companies will invest employee contributions into company stock automatically. The problem with this is, all of sudden, your eggs are sitting in one basket. If for some reason your employer were to go out of business, you not only lose your job, but you’ll also lose a big part of your retirement savings.

More Control

There are a lot of rules and restrictions when it comes to managing your 401(k). For example, there are some 401(k) plans that prevent your from investing the employer contribution part of your 401(k). Instead, that portion sits in a global diversified investment that really offers you no possible return on your money. While these restrictions are tough, they’re okay to deal with if you’re still working for the company. However, once you are no longer an employee for the company, then these restrictions become too much to deal with and they simply are not worth it. If you want to have total control over your investments, I would highly recommend rolling over your 401(k) plan into an IRA.

Consolidate And Simplify

If you’re the type of person who switches around jobs quite a bit and goes from company to company, then odds are good that you are going to have several different 401(k) accounts and managing all of those is going to be a pretty difficult task. If you rollover all of your 401(k) accounts into an IRA, then you’ll have one central location where you can go and check in on your investments. If you kept all of your 401(k) accounts, then you’d find it difficult to get a clear picture of your investments as you would have to check each one individually. A single IRA can alert you much quicker to any problems that may arise. If you happen to be paying too many fees or there’s another problem, you’ll see it clearly with a single IRA.  

Why Pay Two Sets Of Fees?

With every mutual fund you have in a 401(k), management is charging you for annual expenses, and those expenses are coming directly out of your pocket and show up in terms of lower returns, which nobody wants to see. By rolling over your money into an IRA, you’ll save on those fees, and you can save a considerable amount depending on where you choose to invest your money.

Obtain More Service And Fund Selection In A Rollover/Consolidation

With a 401(k), chances are good that you’re going to have very little, if any, funds available to you, which means you aren’t able to diversify properly as you wish to. And what little funds are available are next to nothing, so moving and rolling over to an IRA plan makes a lot more sense. By moving money out of your employer’s plan, you’ll find that you free up extra funds for you to use, and you will most likely gain other additional, helpful services to use.


Managing your 401(k) accounts can be an incredibly difficult and daunting task. If you happen to move around in your job and have a couple different 401(k) accounts, it can be even more difficult than it is for the average person. You have to treat each account differently and know the terms and rules set forth by each one. By choosing to roll over all of your 401(k) accounts into an IRA, you completely simplify that process and make it easier for yourself. After doing so, all of your information and investments will be located in one central location, which makes it easy to manage and track your finances. If you want to help simplify your investments, save money, and make a smart move for your future, it’s time to consider rolling over your 401(k) into an IRA.