Millions of Americans move retirement savings from workplace 401(k) plans to individual retirement accounts annually, a trend that has accelerated as baby boomers approach retirement. In 2023, investors rolled $682 billion into IRAs, more than triple the amount from the early 2000s, with nearly 6 million people completing rollovers that year. The IRS issued updated guidance in August to simplify and standardize the rollover process.
Despite the prevalence of rollovers, financial advisors warn that the decision carries significant risks and potential downsides that are often inadequately discussed. The CFP Board of Standards recently published a guide dispelling common misconceptions about rollovers, including the belief that workers must move their money when changing jobs or that they can reverse the decision later. In reality, most rollovers from a 401(k) to an IRA are irreversible, with limited exceptions such as the Thrift Savings Plan for federal workers.
One major consideration involves investment fees. IRAs typically carry higher annual fees than workplace retirement plans because employees lack the collective purchasing power that employers use to secure lower-cost institutional investment shares. A 2022 analysis found that retail mutual fund shares cost 0.34 percentage points more annually than institutional shares, representing a 37% difference. Over decades, this fee differential can substantially reduce retirement savings; investors who retired in 2018 and rolled funds to IRAs could see aggregate reductions of approximately $45.5 billion over a 25-year retirement period.
IRAs offer greater investment flexibility and more fund options compared to the typically curated selections in 401(k) plans, which averaged 25 funds or fewer in 2025. However, this expanded choice can sometimes lead to decision paralysis. Financial advisors also caution that intermediaries recommending specific IRA rollover investments may not have legal fiduciary obligations to act in investors’ best interests, unlike employers managing 401(k) plans.
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