Should you roll your 401k into an IRA when you leave your job? (#337)

In this episode, A.B. Ridgeway tackles a critical yet often misunderstood financial decision—whether rolling over your 401k to an IRA is always the best move. While conventional wisdom suggests rolling over your retirement savings to gain more control and flexibility, recent studies reveal that this might not be the optimal choice for everyone. A.B. dissects the pros and cons, highlighting the role of fees, institutional advantages, and key differences in investment strategy post-retirement.

Key Takeaways:

1. Fees Matter – Although an IRA may provide more flexibility, retail accounts often charge higher fees than institutional 401k accounts. Rolling over could lead to higher costs, even for the same mutual funds.
2. Investment Strategy Changes Post-Retirement – Once you leave your job, your investment goals and strategies will likely change, and you might not need the exact same funds you had in your 401k.
3. Access to Funds – Rolling over to an IRA gives you more control and flexibility when it comes to accessing your funds, which can be crucial in emergencies or in cases where your former employer restricts withdrawals.

Memorable Quotes:

1. "Yes, the fees are a little bit higher, but how much higher are they really?" – A.B. Ridgeway highlights the importance of understanding fees when rolling over your 401k.
2. "When you leave your company, don’t leave your money there." – A.B. emphasizes the risks of leaving retirement funds with a former employer, particularly in the event of company issues.
3. "It’s not just about the fees—it’s about having the flexibility and knowing your money is in your hands." – A.B. discusses the added control and peace of mind that comes with rolling over to an IRA.

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Resources Mentioned:

• Pew Charitable Trust Study: Study discussing the potential downsides of rolling over 401k accounts.
• FINRA.org: A tool to research and compare fees associated with different investment accounts.

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