401(k) Rollover Advice

You left your job six months ago, and that old 401(k) is still sitting at your former employer. Your buddy told you to roll it over. A financial advisor called and offered to do it for free. Your mom said to leave it alone. Now you’re paralyzed, not sure what to do, so you’re doing nothing—which might be costing you thousands in fees every year.

Here’s what most people don’t know: sometimes rolling over a 401(k) to an IRA is the right move. Sometimes it’s not. It depends on your specific 401(k), your former employer’s plan, what investment options you have access to, and what you’re trying to accomplish.

Most advisors push rollovers because that’s how they get paid—you roll your 401(k) to an IRA they manage, and they collect fees on it. We don’t do that. We review your actual 401(k), compare it to your IRA options, and tell you honestly whether rolling over makes sense or if you’re better off leaving it where it is.

When Rolling Over Makes Sense

If your old 401(k) has high fees (many charge 1-2% annually in administrative and fund expenses), limited investment options, or you’re no longer getting any employer match, rolling to an IRA usually makes sense. IRAs typically offer more investment choices, lower fees, and better control over your money.

If you have multiple old 401(k)s from different jobs scattered around, consolidating them into one IRA makes your life easier—one statement, one login, easier to manage. Plus, if you’re working with a financial advisor, having everything in one place makes it easier to build a cohesive investment strategy.

Rolling over also makes sense if you want access to investments your 401(k) doesn’t offer—like individual stocks, bonds, real estate investment trusts, or specific mutual funds. Most 401(k) plans limit you to 10-30 investment options, while IRAs give you access to thousands.

When Leaving It Makes Sense

If your former employer’s 401(k) has institutional-class funds with rock-bottom expense ratios (some large companies offer funds at 0.02-0.05%), you might not find cheaper options in an IRA. Don’t roll over just because someone told you to—check the fees first.

If you left your job between age 55 and 59½ and might need to access that money, leaving it in the 401(k) lets you withdraw penalty-free. If you roll it to an IRA, you’ll pay a 10% early withdrawal penalty until age 59½. This is called the “Rule of 55” and it’s one of the biggest reasons to leave money in a 401(k).

If you’re worried about creditor protection, 401(k)s have stronger federal protections than IRAs in most states. Arizona offers decent IRA creditor protection, but if you’re in a high-risk profession or concerned about lawsuits, keeping money in a 401(k) might be smarter.

If you have company stock in your 401(k) and it’s appreciated significantly, there’s a special tax strategy called Net Unrealized Appreciation (NUA) that might save you a ton on taxes—but only if you don’t roll it over. This is a complex strategy that requires careful planning.

What We Do

We review your old 401(k) statements and compare them to IRA options. We look at fees, investment choices, any special features (like low-cost institutional funds or company stock), and your personal situation (age, income, goals). Then we tell you what makes sense.

If rolling over is the right move, we help you do it correctly—direct rollover to avoid taxes and penalties, choosing the right IRA provider, and selecting appropriate investments. If leaving it makes sense, we’ll tell you that too, even though we don’t make any money from that advice.

The Bottom Line

Don’t roll over your 401(k) just because someone told you to. Don’t leave it sitting at your old employer just because you haven’t gotten around to dealing with it. Figure out what actually makes sense for your situation.

Have an old 401(k) sitting around? Let’s review it and figure out what you should actually do with it.