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CNBC
401(k) rollovers can be costly — and irreversible. What to know before moving your money
Millions of Americans annually roll funds from 401(k) plans into individual retirement accounts (IRAs), but mistakes made during this process can be both costly and irreversible. Recent data indicates that the volume of rollovers has surged, particularly as baby boomers approach retirement. The IRS has recently issued guidance to streamline rollovers, yet financial advisors caution about the many pitfalls, including the risks of tax penalties and higher fees. Advising investors on rollover decisions is crucial, as many may not be aware of their options to keep funds in existing plans or the irrevocability of certain rollover choices.
MonitorConfidence: HighShort term horizon
Published 24 Aug 2026, 12:55 UTC4 min read
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Summary
TL;DR
- Rollover amounts from 401(k) to IRAs totaled $682 billion in 2023.
- Nearly half of new traditional IRAs originated from 401(k) rollovers in 2020.
- Investment fees can differ significantly between retail and institutional shares.
- Decisions on rollovers may not be reversible, limiting future options.
- The IRS aims to simplify rollover processes amidst increasing transactions.
Interesting facts
- The term 'gray tsunami' refers to the increasing number of retiring baby boomers.
- A 0.25% difference in fees can equate to a $30,000 difference after 20 years on a $100,000 investment.
- About 69% of 401(k) plans offered 25 funds or fewer in 2025.