Are there any valid reasons to not rollover a former 401(k) when changing jobs?

I have several little ones that I never quite got around to rolling together - with an upcoming job change, should they all be combined into my new employer's retirement plan? If not, what else might be considered?

3 Answers 3


The biggest reason why one might want to leave 401k money invested in an ex-employer's plan is that the plan offers some superior investment opportunities that are not available elsewhere, e.g. some mutual funds that are not open to individual investors such as S&P index funds for institutional investors (these have expense ratios even smaller than the already low expense ratios of good S&P index funds) or "hot" funds that are (usually temporarily) closed to new investors, etc. The biggest reason to roll over 401k money from an ex-employer's plan to the 401k plan of a new employer is essentially the same: the new employer's plan offers superior investment opportunities that are not available elsewhere. Of course, the new employer's 401k plan must accept such roll overs. I do not believe that it is a requirement that a 401k plan must accept rollovers, but rather an option that a plan can be set up to allow for or not.

Another reason to roll over 401k money from one plan to another (rather than into an IRA) is to keep it safe from creditors. If you are sued and found liable for damages in a court proceeding, the plaintiff can come after IRA assets but not after 401k money. Also, you can take a loan from the 401k money (subject to various rules about how much can be borrowed, payment requirements etc) which you cannot from an IRA.

That being said, the benefits of keeping 401k money as 401k money must be weighed against the usually higher administrative costs and usually poorer and more limited choices of investment opportunities available in most 401k plans as Muro has said already.

  • 2
    definitely the case for me. My S&P 500 index fund has an ER of 0.04%.
    – Dang Khoa
    Jun 14, 2013 at 16:11
  • @DangKhoa Could you elaborate a little? Is your S&P index fund one that is offered through your 401k plan or one in which you invest in outside your 401k plan because the index fund offering in the 401k plan has higher expense ratio? Jun 14, 2013 at 16:15
  • 1
    @DangKhoa Congratulations on having an excellent set of alternatives in your 401k plan! Your experience almost certainly differs from most other people who have to contend with 401ks that offer only high ER funds that they would not bother even looking at outside the 401k Jun 14, 2013 at 18:27
  • 1
    A side note on the safe from creditors statement is that IRA assets over 1.1 million could be subject to creditors in some instances.
    – stoj
    Jun 14, 2013 at 20:58
  • 1
    +1 while 401(k) loans are best avoided, this is a good point, the $100k+ balance gives you the option to take up to a $50k loan at a very low cost. Jun 16, 2013 at 20:14

I've changed jobs several times and I chose to rollover my 401k from the previous employer into an IRA instead of the new employer's 401k plan. The biggest reason not to rollover the 401k into the new employer's 401k plan was due to the limited investments offered by 401k plans. I found it better to roll the 401k into an IRA where I can invest in any stock or fund.

  • 2
    Plus the expenses tend to be higher on 401k accounts than IRA accounts. So in the long run the IRA option is cheaper.
    – JohnFx
    Jun 16, 2013 at 0:19
  • If the answer is still true in 2019, is it better to have multiple IRA accounts than a consolidated, rolled-over 401k? Wouldn't there be a tax penalty for withdrawing from 401k? May 23, 2019 at 1:40

Another minor reason not to rollover would be to avoid the pro-rata taxes when doing a backdoor Roth IRA contribution.

  • 2
    A rollover to the next 401(k) would not trip up a Roth conversion. A rollover to IRA is another issue. Jun 16, 2013 at 20:09
  • I thought transferring to a new 401(k) was called a "roll-in". I assumed the question meant a rollover to an IRA, but looking at it again they do suggest the former.
    – Craig W
    Jun 16, 2013 at 23:45
  • I think you are correct, strictly speaking. I am so used to the word being misused, I ignore in favor of addressing the intent of the question. There was a time that one needed to use a designated "rollover IRA" to act as a conduit if one ever wished to transfer the funds into another 401(k) later on, that requirement is gone. Jun 17, 2013 at 4:46
  • @CraigW - my new employer's HR department and Fidelity both refer to it as a "rollover". <shrug>
    – warren
    Jun 20, 2013 at 19:29

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .