One of the most common questions we hear from clients preparing for retirement or changing jobs is “Should I transfer my 401k to an IRA?”
The truth? There’s no one-size-fits-all answer. But there are clear, critical factors you must consider to make the best decision for your long-term financial security. In this article, you’ll gain insight into the pros, cons, and strategic moves you can make to protect your future.
Disclosure: This article is for educational purposes only and should not be used as a substitute for personalized investment or financial advice. Always consult your qualified financial advisor before making any financial decisions.
Wealth Inside and Out®
Today, I’m interviewing Susan Kroeger, CFP®, about the factors you need to consider before transferring your 401(k) to an IRA.
In this episode, you will learn:
>>(5:37) How to select financial products 
that align with your goals
>>(6:52) When a rollover makes strategic sense
>>(10:40) Estate planning considerations
>>(12:15) Roth IRA conversion benefits
>>(18:50) How to create guaranteed income streams
>>(25:28) Planning for multigenerational wealth transfer
What You Need to Consider Before Making a Move
Before transferring your 401(k), ask yourself:
- Do I have multiple old 401(k)s or IRAs to consolidate?
- What are the fees on my current 401(k) plan?
- Am I getting personalized support or just a generic plan?
- What are the investment options available in my 401(k)?
- Can I leave the account intact if I prefer?
If you have questions or need support, click here:
You can’t rely on your employer, the government, or your spouse to provide long-term financial security. You must take control—and it begins with understanding your options.
7 Key Benefits of Transferring to an IRA
1. Expanded Investment Options
Most 401(k)s have limited, pre-selected mutual funds. IRAs typically offer:
- Individual stocks and bonds
- Index funds and ETFs
- Alternative assets like REITs or commodities
This allows you to build a portfolio that better reflects your values, risk tolerance, and retirement goals.
2. Potentially Lower Fees
Employer-sponsored plans often come with administrative fees and higher-cost mutual funds. Rolling over into a low-cost brokerage IRA may provide:
- Lower or no account fees
- Access to low-cost index or institutional funds
- Greater control over how your money is managed
3. Simplified Retirement Management
By consolidating old 401(k)s into a single IRA, 
you’ll have:
- Fewer accounts to monitor
- Simplified tax planning and RMD tracking
- Easier asset allocation and rebalancing
4. More Flexible Estate Planning
IRAs allow you to name multiple beneficiaries with customizable terms. Some custodians offer “stretch” IRA options, allowing heirs to spread distributions over their lifetimes, which helps reduce the tax impact.
5. Opportunity for Roth Conversions
You can convert traditional IRA funds to a Roth IRA, locking in tax-free growth. While this move creates a tax liability now, it can be a powerful long-term strategy if done strategically.
6. No RMDs for Roth IRAs
Roth IRAs do not require minimum distributions during your lifetime—providing more flexibility in your income planning and allowing you to leave a greater legacy.
7. Potential for Better Support
Many IRA providers offer robust tools, access to financial planners, and personalized guidance that employer plans don’t offer.
Potential Downsides to Know
Loss of Employer Contributions
If you’re still working and roll over funds from your current employer’s plan, you’ll lose access to ongoing matching contributions—a significant source of free retirement savings.
Less Legal Protection from Creditors
401(k)s are protected under federal ERISA law. IRAs are protected at the state level, which can vary significantly. Know your state’s creditor protection laws.
Possibly Higher Fees (If You’re Not Careful)
Not all IRAs are low-cost. Some carry:
- High management fees
- Commission-based investment products
- Active trading costs that reduce long-term returns
Increased Responsibility
With more freedom comes more responsibility. Managing a diversified IRA portfolio without a clear strategy or an experienced advisor can lead to costly mistakes.
Roth Conversion Tax Consequences
While Roth conversions offer long-term tax advantages, they create taxable income in the year of the conversion. As a result, you could end up in a higher tax bracket if you don’t proactively develop a plan.
Traditional IRA RMDs Still Apply
Just like 401(k)s, traditional IRAs require you to begin taking required minimum distributions (RMDs) at age 73, potentially increasing your tax liability during retirement.
Fewer Early Withdrawal Options
401(k) plans allow penalty-free withdrawals if you leave your job after age 55. IRAs don’t provide this benefit, which could impact your access to funds if you plan to retire early.
Can I Transfer My 401(k) to an IRA While Still Working?
Yes, but only under certain conditions.
In-Service Distributions
Some plans allow you to roll over funds while still employed—often beginning at age 59½. This can provide strategic flexibility without waiting until you retire.
Review Plan Rules.
Always consult your plan administrator. Not all plans allow in-service rollovers; some only allow partial rollovers.
Consider Partial Rollovers.
If eligible, you may want to keep part of your 401(k) to maintain loan access or employer matching and roll the rest into an IRA for better investment control.
Use Direct Rollovers to Avoid Taxes.
A direct trustee-to-trustee rollover avoids triggering taxes or early withdrawal penalties.
Planning Tips Before You Roll Over
Review Your Existing Plan.
Look at the investment options, fee structure, and support services. If your plan is low-cost and well-managed, it might make sense to keep it.
Compare IRA Options
Not all IRAs are created equal. Look for:
- Low administrative and investment fees
- Wide investment selection
- High-quality customer support
Work With a Trusted Financial Advisor.
An advisor can help you:
- Assess whether a rollover aligns with your overall retirement goals
- Strategically manage Roth conversions
- Optimize your income and estate planning
- Plan for tax Implications
If you’re considering a Roth conversion, map out the tax impact over several years. A well-executed plan could save you thousands in taxes while setting you up for tax-free income.
Final Thoughts – Should I Transfer My 401k to an IRA?
Transferring your 401(k) to an IRA can be a powerful strategy when done with the right plan in place.
It gives you more control, more investment flexibility, and more options for creating guaranteed income in retirement. But it’s not for everyone.
The key is to evaluate your complete financial picture, understand what matters most to you, and work with an experienced advisor who can help you make the most informed decision.
Your future self—and your loved ones—will thank you.
And remember, you’ve got this. We’re here to help you every step of the way.
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Disclosure
This content is for informational purposes only and does not replace personalized investment, financial, or tax advice. MillionaireSeries.com® and its affiliates assume no responsibility for financial outcomes based on this information. All materials and intellectual property are copyrighted by MillionaireSeries.com®. This information is for educational purposes only. It is not intended to replace any advisor or specialist or provide investment, financial, tax, retirement, planning, or healthcare advice. By accessing this content, you agree to hold MillionaireSeries.com® and its affiliates harmless for results achieved or not achieved.
To your financially secure life,
Annette
