Rollovers from workplace retirement plans to individual retirement accounts have surged in recent years as older Americans enter retirement. The IRS reported that $682 billion moved into IRAs in 2023, representing more than triple the volume from the early 2000s. Approximately 6 million people executed rollovers that year, compared to about 4 million a decade earlier. Federal authorities issued guidance on Aug. 12 aimed at streamlining what can be a complex process, while industry organizations have highlighted critical risks that investors should consider before proceeding.
Financial advisors point to two prevalent misconceptions about rollovers. Workers often believe they must move their funds when changing employers, though most 401(k) plans permit account holders to leave assets in their prior employer’s plan. Additionally, many investors assume they can reverse a rollover decision if circumstances change. In practice, moving money from a 401(k) to an IRA is typically permanent, with few exceptions such as the Thrift Savings Plan available to federal workers. This irreversibility makes careful planning essential before initiating any transfer.
Fee structures present a significant financial consideration. Retirement plans sponsored by employers typically negotiate lower-cost institutional share classes of mutual funds through collective bargaining power, whereas individual IRA investors access higher-cost retail shares of the same funds. Research from The Pew Charitable Trusts found retail share fees averaged 0.34 percentage points higher than institutional shares in 2019. Over extended retirement periods, these fee differentials compound substantially—Pew analysis suggested retirees who rolled over funds in 2018 could experience approximately $45.5 billion in aggregate savings reductions across a hypothetical 25-year retirement.
IRAs do offer certain advantages, particularly regarding investment flexibility and withdrawal options. Account holders can choose from vastly more investment options than the typically curated selections available in employer plans, which averaged 25 or fewer funds in 2025. However, expanded choice can also create decision-making challenges. Employer-sponsored plans carry legal protections, as plan sponsors maintain fiduciary obligations to select investments prioritizing worker interests. Financial intermediaries recommending specific rollover investments may face no equivalent obligation, advisors cautioned.
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