July 6, 2022

Before rolling anything over or adjusting your plan, you need to be sure you’ve thought of all possible consequences and issues. Failing to do so can put you in a difficult position. For example, if you rollover your IRA but don’t realize the impact of fees, this can damage your retirement savings and your overall financial picture.

It might make sense in your present situation to rollover your IRA, but make sure you’re aware of all of the potential consequences and fallout. A study found that workers are not always better served by keeping money in their workplace plan. Although IRAs have some advantages, they are not always less expensive. In 2018, over $516.7 billion was rolled over from workplace retirement plan into traditional individual retirement accounts. IRA rollovers could cost Americans billions of dollars in fees, however, according to a Pew Charitable Trust study.

Although 46% of recent retirees rolled at least some of their workplace retirement funds into an IRA, another 16% of those close to retirement plan to do so as well. Bear in mind that approximately 15% of 401(k) plans do not allow employees to retain funds in the plan when they retire. The typical hybrid 401(k) fund is 0.19 percentage points less expensive than the same fund available to IRA investors. That is a fee differential that might seem minor in the short term but can really add up over the course of time.

For example, Pew determined that of those who rolled over their investments in 2018, they would have lost collectively $980 million in one year due to extra fees. Make sure that you’re partnering with an experienced and dedicated financial planning firm to keep you aware of how any changes in your strategy, especially rollovers, can influence your future.

Talk to our office today about a holistic approach to your financial strategies. We believe all the small steps add up and we’ll help you chart a course for the future effectively.