Here’s a question for anyone who’s about to leave an employer: Are you keeping your money in the retirement plan, or are you taking your savings with you?
For companies that provide workplace retirement plans, that’s a $9.2 trillion question — that’s the number of assets held in individual retirement plans as of the end of 2017, according to the Investment Company Institute.
These 401(k) record-keepers have a bird’s eye view of employees’ savings and they are in a prime position to contact plan participants about rolling over their balance into an IRA with them — which may not always work out in favor of departing workers.
“They will try to take you out of your 401(k) and put you into a suboptimal IRA rollover,” said Anthony Isola, a financial advisor at Ritholtz Wealth Management in New York.
“You can go from a 401(k) plan with an expense ratio under 1 percent to a rollover with costs of 2 to 3 percent, which is very substantial,” he said.