Advice on 402k/IRA

Should You Roll Over to an IRA?

Rolling funds to an IRA can be advantageous, but it depends on the specifics of your situation. Consider the following:

Reasons to Roll Over to an IRA:

Lower Fees: IRAs often give you access to low-cost index funds and ETFs (e.g., Vanguard or Fidelity), which may have expense ratios as low as 0.03% to 0.1%.
Greater Investment Options: Unlike 401(k)s, which limit fund choices, IRAs offer a wide variety of investments, including ETFs, stocks, and bonds.
Consolidation: Rolling over can simplify your finances by having fewer accounts to manage.
No Employer Restrictions: If you’ve left the employer offering the 401(k), rolling funds out can free you from their fee structure and plan limitations.

Reasons to Keep the 401(k):

Creditor Protection: 401(k)s often have stronger protections from creditors and lawsuits compared to IRAs, depending on your state.
Plan-Specific Features: Some 401(k) plans allow loans or other benefits that IRAs don’t.
Penalty-Free Early Withdrawals: If you’re aged 55-59.5 and separate from your employer, you can withdraw funds from a 401(k) penalty-free, unlike IRAs, which have a higher threshold of 59.5 for penalty-free withdrawals.
New Employer Match: If your new employer allows you to roll your old 401(k) into their plan, you might benefit from lower fees or new matching contributions.

Steps to Evaluate and Act:

Compare Costs:
- Check the combined admin fee (0.71%) and expense ratios of your 401(k) investments.
- Compare these costs to low-cost IRA providers like Vanguard, Fidelity, or Schwab.
Analyze Investment Options:
- Does the 401(k) offer high-quality, low-cost funds (e.g., index funds)? If not, an IRA rollover could give you better choices.
Plan Your Rollout:
- If you choose an IRA, contact your 401(k) provider and preferred IRA custodian to execute a direct rollover to avoid taxes and penalties.

Bottom Line:

A 0.71% admin fee is high, so rolling over to an IRA is likely a smart move, especially if:

You want to reduce fees and gain access to more investment options.
You don’t rely on features like loans or penalty-free early withdrawals from your 401(k).

However, weigh the creditor protection and withdrawal flexibility of your 401(k) against the benefits of an IRA before deciding. If you’re unsure, consulting a financial advisor to analyze your