---
title: "Why Should You Roll Over An Employer 401(k)?"
description: "Switched jobs? Should you keep your previous employer's 401(k) or roll it over? Roll it over -- here's why!"
canonical_url: https://trendshare.org/how-to-invest/why-should-you-roll-over-an-employer-401k
markdown_url: https://trendshare.org/ai/why-should-you-roll-over-an-employer-401k.md
published: 2017-04-03
last_updated: 2017-04-03
content_license: https://trendshare.org/about/disclaimer
---
# Why Should You Roll Over An Employer 401(k)?

Source: https://trendshare.org/how-to-invest/why-should-you-roll-over-an-employer-401k
Updated: 2017-04-03
If you've worked a professional job in the private sector for a while, you
probably have a 401(k). That's a good way to save up money for retirement, with
its tax deferred contributions and, if you're fortunate, [employer matching contributions](https://trendshare.org/how-to-invest/always-choose-employer-matching-401k-contributions).

You're probably not going to stick with the same employer for your entire
career, however. (You're probably not with the same employer you started with
either.) If you've switched jobs two or three times over a twenty year career
so far, you may have multiple 401(k) accounts with multiple financial service
providers. This doesn't have to be the case.

Regardless of any change of job, location, tax status, anything, all the
money you've contributed and all the money your employer has contributed on
your behalf belongs to you. You may have the right and the opportunity to roll
over your 401(k) from previous employers to another plan, including your own [self-directed](https://trendshare.org/how-to-invest/what-is-self-directed-investing) IRA.

The details of this rollover will vary, depending on the destination
account, your employment situation, and other factors, but this is a big
decision that can go very well for you, if you meet the right criteria. Why
would you roll over a 401(k) into an IRA?

## More Fund Choices

Available investment choices for employer-sponsored 401(k) programs have
improved in the past decade, but you still probably have fewer than a couple of
dozen individual funds from which to choose. You may have a target-date fund, a
couple of indexed investments, a bond fund, some international possibilities,
and a few well-known mixtures.

You don't have access to the entirety of the stock market, or even the
entirety of [the ETF universe](https://trendshare.org/how-to-invest/should-you-invest-in-etfs). That's
just the nature of employer-sponsored programs. To make them easier to administer,
you have a few options.

Some of these options can be good. You can often find a decent index fund
and a medium or small-cap fund—but you'll miss out on undervalued stocks, where
the opportunities can be much greater.

## Cheaper Fund Choices

In a self-directed IRA with a discount broker, you'll have access to any ETF
you can imagine, which lets you pick and choose based on fund costs as well as
philosophy and performance. Why pay 0.65% fees for a fund that's an equivalent
of a fund with 0.15% fees?

This isn't the biggest advantage, but over decades it can add up.

This point is only strengthened by the fact that some 401(k) providers
charge additional fees every quarter.

## Consolidation

If you practice [portfolio rebalancing](https://trendshare.org/how-to-invest/what-is-portfolio-rebalancing), it's easier to do this with one account than several. (If you
*don't* rebalance your portfolio across multiple accounts, having only
one account makes it easier to start.

Furthermore, your broker may give you access to additional tools, more
trades, lower commissions, and other perks as you have more and more money in
your account. $50,000 apiece in five accounts might not buy you much time and
attention, but $250,000 in a single account can get you started with additional
investment abilities at a brokerage.

## Disadvantages of 401(k) Rollover

If you do consider rolling over a 401(k) into your own IRA, do so with
caution and intent. If you've never taken out a loan, received employer stock
with special distribution instructions, or done anything other than contribute,
the process can be easy. Anything special makes the process more difficult, and
may incur tax penalties.

[A rollover may not always be in your best interest](https://www.nerdwallet.com/blog/investing/think-twice-rollover-401k/), so this advice works best
for self-directed investors who already know how to invest. You may have to
spend some time on the phone with your account administrator, working through
financial details, only to receive a check in the mail in a couple of weeks
that you have to forward elsewhere.

As the linked article argues, paying a separate financial advisor to tell
you where to invest your money can rack up additional and unnecessary fees, and
end up with you owning funds that will underperform the options you had with
your previous employer's plan. *Rolling over your 401(k) works far better
when you're a confident, self-directed investor.*

None of these are reasons *never* to perform the rollover, but the
process isn't always as simple as paying a bill online.

## Should You Roll Over Your 401(k)?

For most investors reading this who've already set up their own brokerage
accounts, made a few trades, picked some great undervalued stocks, the
advantages outweigh the potential negatives. Again, any complicated tax or
distribution scenarios can change the situation, so consult with the
appropriate professionals to avoid unnecessary and unwanted surprises.

For the novice investor making his or her first steps into gaining more
financial control, the advice to [invest in simple index funds](https://trendshare.org/how-to-invest/buy-the-s&p-index-fund) is still wise. If you can avoid any unwarranted
penalties and get access to better/cheaper fund choices and pay less in fees,
the advantage may be worth the extra overhead you need to get settled with your
own IRA and transfer everything over.

Even if you're a buy-and-forget it investor, who rebalances once a year (if
that), the amount of control you have over a single account, with funds or
stocks of your choosing, can help you sleep better at night. You know you've
invested in exactly what you wanted and are paying exactly what it's worth.
That's worth a lot.