401(k) or IRA Rollover: Which Is Best for You When You Change Jobs?
Here are four key factors to consider.

Enough time has passed that songs from the 1980s are now categorized as "classics" or even "oldies." One in particular by The Clash centers around a question many investors have to ask themselves about their 401(k) accounts when they change jobs: Should I stay, or should I go? In other words, should funds stay in a 401(k) account, or roll over to an individual retirement account?
Well, it depends. While it may make sense for some investors to keep their account balance in a 401(k) account, other investors could be better served by rolling their balance to an IRA. A comprehensive plan that encompasses investments, taxes and cash flows will dictate which option is best. While each case is specific to the individual, let's look at the factors that could tilt the decision in favor of an IRA rollover.
Fees
If a 401(k) plan has costly fees, investors may consider rolling the balance to an IRA. As a general rule, 401(k) plans benefit from economies of scale. Large plans often have relatively low fees, while small plans often have higher fees. Those costs could be paid at the plan level (by participants), at the company level or split between the two. It is best to know what the fees are and who collects them, if you want to keep your balance in a 401(k) plan.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Withdrawal Options and Liquidation
A 401(k) plan has a governing document that sets rules for when and how participants can take distributions from their accounts, among other things. A plan document may limit participants to a number of annual withdrawals or may prevent partial lump sum distributions. Some plan documents only allow for systematic (say, monthly or quarterly) withdrawals. IRAs, on the other hand, do not have these sorts of limitations.
Additionally, the company sponsoring the 401(k) sets the plan rules. If a company changes the plan document to exclude former employees, a participant is forced to roll their account to an IRA or other retirement account at a time when market fluctuations might make it less than ideal to do so.
Execution
Investors can benefit from their adviser's ability to take action in a timely manner. With assets held in a 401(k) an adviser can only make recommendations for action. The adviser can't execute trades. The result can be that trading, rebalancing and re-allocation are not executed in a timely manner. An IRA rollover can hasten more optimal execution by an adviser that could lead to greater wealth accretion over time.
Investment Choices and Asset Location
A 401(k) plan generally has an investment menu that limits participants to the options available through the plan. An investor's ideal allocation may call for asset classes that are simply not offered through a 401(k) plan.
Another consideration is what's called asset location—creating the most tax-efficient location of stocks and bonds in different accounts based on the tax treatment of the accounts. Depending on a 401(k) plan's investment options, an investor may be left with less attractive asset location options if funds remain in a 401(k) plan.
Certainly, there is a lot to account for when deciding what to do with a 401(k) held with a former employer, which is why it makes sense to evaluate your own situation, your goals and retirement plan.
A licensed attorney, Jared Snider serves as a senior wealth adviser at Exencial Wealth Advisors in Oklahoma City. He strives to help individuals and families attain their goals, manage risk and cultivate peace of mind.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jared Snider is a licensed attorney and serves as a senior wealth adviser at Exencial Wealth Advisors in Oklahoma City. He guides families, business owners and professionals in goal-based investing, planning and risk management. By creating solutions with clear action steps and follow-through, he strives to create peace of mind and confidence for his clients. Snider earned his Juris Doctor with highest honors from The University of Tulsa College of Law. Prior to joining Exencial, he practiced estate planning and real estate law. He is a member of Exencial's Investment Committee.
-
TSA Expands PreCheck Access for Military Members, Families and Veterans
Enhanced "Serve with Honor, Travel with Ease" initiative lowers barriers to expedited screening for service members and their loved ones.
-
What to Know About New Medicaid Cuts: Is Your Local Hospital Closing Soon?
Tax Policy Trump’s ‘One Big Beautiful Bill’ is now law, and rural hospitals across the U.S. are on the chopping block.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually Magical
Do you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
The law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market Jitters
Market volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the Sidelines
Forget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
How Advisers Can Steer Their Clients Through Market Volatility (and Strengthen Their Relationships)
Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.
-
The Hidden Costs of Caregiving: Crisis Goes Well Beyond Financial Issues
Many caregivers are drained emotionally as well as financially, leading to depression, burnout and depleted retirement prospects. What's to be done?