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Top 4 Reasons to Roll Over Your Old 401K to an IRA

September 19, 2025

Top 4 Reasons to Roll Over 401K to an IRA

Staying at one company for your whole career is pretty rare these days! With that said, it’s likely that you have an old 401K sitting at your old employer plan and you’ve wondered what to do with it. 

If you’ve ever said to yourself, “Oh, it’s just a small 401K” or “I’ve been meaning to roll that over for years”, you’re not alone. Life gets busy, but rolling over your 401K now will make your financial life simpler and help you take control of your retirement savings.

Here’s a look at your options and why a Rollover IRA might be your best move.

Your Options for an Old 401K

When you leave a company, the contributions you’ve made to your 401K are yours. Employer contributions may be subject to vesting rules, but in most circumstances, the account is yours to do as you wish. 

Your options:

1. Keep your old 401K with your former employer

You can often leave your 401K invested as is, but you won’t be contributing any more to it, and employer contributions stop. Confirm with your plan administrator that leaving it in place is allowed. I don’t suggest this as oftentimes it gets forgotten about, is excluded from future financial planning and the longer you wait the harder it may become to access.

2. Roll it over to a new employer’s 401K

Some employers allow you to consolidate old accounts into your new employer’s plan. This can simplify your finances, which I’m always a strong promoter of but you’ll have to keep two things in mind:

  1. What are your investment options? Your investment options are limited to what the new plan offers, so keep that in mind.
  1. What are the plan fees? Some plans have expensive fees to operate the plan and the investment options provided have costly expense ratios. Navigate what those costs are before rolling it over into your new 401K. 

I do like the simplicity of this option, but again, keep in mind those two things first. 

3. Roll it over to a Rollover IRA

  • Traditional 401K → Traditional IRA
  • Traditional 401K → Roth IRA (taxes apply!!!)
  • Roth 401K → Roth IRA

Rolling over to a Rollover IRA gives you more control, flexibility, and often lower fees.

Top 4 Reasons to Roll Over Your 401K to an IRA

1. Lower Administrative Costs and Fees

401Ks often come with administrative fees and fund expenses ranging 0.5%–2%. Over time, these fees can eat significantly into your returns.

Rolling over to an IRA gives you choices:

  • Use a Robo-Advisor for low cost professional management
  • Hire a financial advisor for personalized service

Even a low cost Robo-Advisor or self managed Rollover IRA can save you thousands in fees over time.

2. More Investment Options

When investing in your employer provided retirement plan, your options for investing are limited to a range of pre-approved funds. You are limited in your investment selection and do not have the option to invest in whatever it is that you want.

If you were to open an IRA, you would have access to invest in individual stocks, bonds, ETFs, mutual funds, etc. and would not be limited to a pre-approved list of options.

3. Greater Financial Control

Leaving your old 401K behind often means limited updates, restricted trading, and little control.

Once I leave my employer, I want the freedom to decide where my account is held, how it is invested, what changes I make to it and when and the fees being charged. You will find that type of control by opening an IRA because an IRA lets you:

  • Decide where your account is held
  • Choose how your money is invested
  • Make changes on your timeline
  • See and manage all fees

4. Convenience & Simplicity 

Keeping multiple retirement accounts scattered across employers can get complicated. Rolling over your 401K to an IRA helps you consolidate and streamline your financial life, making it easier to track, manage, and plan for the future.

Make this part of your life as simple as you can.

How to Roll Over Your 401K

Rolling over a 401K used to be tedious and time consuming, but new tools have made it much simpler. You can:

  • Do it yourself: Open an IRA and coordinate with your former employer’s plan administrator. 
  • Use a FinTech service like Capitalize: They handle all the paperwork and administrative work for free while also helping you open a new account at your chosen brokerage firm, if needed.

Capitalize is compensated by the brokerage you choose, so it’s a completely free service for you. I’ve used it for my own rollover and can personally vouch for how seamless it was.

Don’t Let Your Assets Sit There in the Background

Life gets busy, but your retirement savings are worth prioritizing now. Rolling over your 401K to an IRA is one of the easiest ways to lower fees, gain flexibility, and take control of your financial future.

written by: victoria mcgruder, cpa, cpwa®

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Thank you for being here - I'm Victoria!
 

I'm a financial advocate, coach, and blogger on a mission to help you build wealth with confidence! 

Having worked closely with countless clients over my 15+ year career, I've gained a very deep understanding of money management and effective planning strategies in guiding individuals and families towards financial success. Now, I want to share that wealth of knowledge and insight to empower YOU to take control of their finances, make well-informed decisions, and create a life of abundance without the stress of finances looming over you. I'm so glad you're here! 

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