Rolling a 401(k) Account into an IRA: Why you Shouldn't Abandon your old companies' Retirement Plans

How many retirement accounts do you have?

The typical baby boomer will have an average of 12 jobs over their working career, according to the Bureau of Labor Statistics. While job moves are practically unavoidable, there are both internal and external challenges to navigate. A common mistake that many investors make is abandoning their old company’s retirement plan with the hopes of figuring it out later. If this is you, you’re not alone! According to USA Today, Americans lost track of more than $7.7 billion worth of retirement savings in 2015 alone by “accidentally and unknowingly” abandoning their 401(k).

Consolidate them into one account

Working with a trusted partner like Human Investing to consolidate your old 401k’s (or 403b) into a single IRA is the best choice. This article outlines the three key benefits of rolling over your old employer retirement plans into an IRA. Consolidating accounts can help you track your hard-earned dollars and simplify your financial household. One account. One Statement. One password. One clear Retirement goal.

Take advantage of the universe of investment options WITH AN IRA

The investment options in a 401k can be limited. According to Vanguard, the average 401k plan has 27.2 investment options for employees to choose from. The graphic below demonstrates how your investment plan may get out of hand quickly as your list of ex-employers grows. Consolidating your 401k into an IRA can give you access to a greater universe of investment options tailored to your needs.

Utilizing suitable investment options that align with your retirement goals is important for a successful financial plan. Human Investing’s team of advisors are dedicated to building a customized investment strategy that aligns with your retirement goals and current financial situation.

The Benefits of an IRA

No investment decision is a one-size-fits-all but IRA’s have a lot of benefits. Did you know that IRA account decisions are made by you – not your employer? Here are other things to know about IRAs vs your 401k.

Build a Retirement Income Plan

Saving money in a retirement account is not a means to an end. There is a purpose to it, and for most the goal is retirement. You put money into a retirement account so that you may withdraw it someday when you are no longer receiving a paycheck. Our Human Investing advisors are specialists when it comes to building a retirement income plan.

When converting hard-earned savings into retirement income, an IRA is superior to a 401k. An IRA affords a retiree the ability to do two crucial things:

1) Increase the tax-efficiency of their withdrawals; and

2) Strategize how they will withdraw money to not violate the first rule of investing: buy low, sell high.

Which account type is right for you as you plan for retirement? For most, an IRA makes sense. An IRA can provide consolidation, more investment options, and efficiencies in retirement.

Start your rollover

Deciphering what to do with your old retirement account can be intimidating and we want to be here to help. If you worked for a publicly traded company and owned shares in your 401k, there are other rollover rules that apply. If you have more questions or would like to discuss your retirement plan with an advisor, schedule an appointment below.

Sources:

[1] U.S. Bureau of Labor Statistics. "Number of Jobs, Labor Market Experience, and Earnings Growth: Results From a National Longitudinal Survey." Accessed April 1, 2022.

[2] USA Today, February 25, 2018

[3] The Vanguard Group, How America Saves Report - 2020.