A recent investigative report published by Bloomberg illustrates what can go wrong with 401(k) plan rollovers. Many employees who change jobs choose to roll their 401(k) accounts into IRAs rather than leaving them in place or rolling them into their new employers 401(k) plan. Rolling a 401(k) account into an IRA is generally a really bad idea, for the following reasons:
- Higher fees. Outside of those investors who have a 401(k) plan account with millions, it is likely that anyone who rolls money into an IRA account will pay a lot more in fees. IRA account investments are often more expensive since access to only retail mutual fund share classes is generally possible. This is because most IRA accounts are too small to meet lower cost share class minimums a problem 401(k) plans do not have. In addition, there are likely to be annual IRA account fees. Many IRA account holders experience fees that are 100% or more than what they paid in their 401(k) plan.
