Business & Finance
Financial groups warn of permanent decisions and higher fees in 401(k) rollovers
Regulatory and advisory bodies issue guides to help savers navigate the increasingly common process of moving retirement assets.
The short version
- Over 6 million investors rolled $682 billion into IRAs in 2023, representing a significant increase in rollover volume over the last two decades.
- Financial organizations warn that rolling over 401(k) assets to an IRA is generally irreversible and can expose investors to higher retail fees.
- The IRS and the CFP Board have issued new guidance to simplify the rollover process while cautioning workers against common misconceptions.
Key facts
- According to IRS data, investors rolled $682 billion into IRAs in 2023, nearly tripling the amount from the early 2000s.[CNBC]
- The IRS issued guidance on August 12 to simplify and accelerate the retirement rollover process.[CNBC]
- The CFP Board of Standards released a guide on August 19 clarifying that workers are not required to roll over assets when changing jobs and that the decision to roll over is typically irreversible.[CNBC]
- A 2022 analysis by The Pew Charitable Trusts found that annual fees for median retail stock mutual fund shares in 2019 were 0.34 percentage points higher than those for institutional shares typically available in 401(k) plans.[CNBC]
- Unlike 401(k) sponsors who are bound by a fiduciary duty to act in their workers' best interest, some financial intermediaries recommending IRA rollovers may not be held to a fiduciary standard.[CNBC]