When you leave a job, the retirement savings in your 401(k) or 403(b) don’t have to stay behind. You generally have three options: leave the money in your old plan, cash it out or roll it over into a new retirement account. Rolling the money over is often the best choice because it consolidates your retirement funds, plus gives you more investment options. Here’s how rolling over to an IRA works.
Back up: What’s an IRA?
An IRA, or individual retirement account, is a tax-advantaged account offering a range of investment opportunities, including stocks, bonds, mutual funds, CDs and ETFs. You can set up automatic contributions into your IRA just like you would with a 401(k). The 2025 contribution limit for a traditional IRA is $7,000 for people under age 50 and $8,000 for those 50 or older. IRA contributions may be tax-deductible, depending on your income, filing status and whether or not you have a workplace retirement plan.
You can open an IRA at really any big brokerage:
Charles Schwab
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
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Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
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Bonus
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Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
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Investment options
Stocks, bonds, mutual funds, CDs and ETFs
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Educational resources
Extensive retirement planning tools
Pros
- $0 minimum deposit for active investing
- No commission fees for stock and ETF trades and no transaction fees for over 4,000 mutual funds
- Offers extensive retirement planning tools
- Users can get on-demand advice from a professional advisor/Schwab expert
- Robo-advisor Schwab Intelligent Portfolios® available as a no-fee automated service option (with Premium version available for a fee)
- Award-winning thinkorswim® trading platforms and all their cutting-edge tools are now available at Schwab.
- 24/7 customer support access by phone or chat
- Charles Schwab offers over 300 brick-and-mortar branches across the U.S. for in-person support
Cons
- Specific transactions may require commission fee
- Robo-advisor Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300, then a $30 per month advisory fee. For that price, you get unlimited 1:1 guidance from a CFP, interactive planning tools, plus a personalized roadmap for reaching your goals
Fidelity Investments
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance for robo-advisor to start investing
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over and this includes access to unlimited 1-on-1 coaching calls from a Fidelity advisor)
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Bonus
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Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
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Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
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Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Pros
- No commission fees for stock, ETF, options trades
- No transaction fees for over 3,400 mutual funds
- Limited-time special offers
- Abundant educational tools and resources
- 24/7 customer service
- Over 100 brick-and-mortar branches across the U.S. for face-to-face support
Cons
- Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
- Some of Fidelity’s mutual funds require reaching specific thresholds
- Reports of platform outages during heavy trading days
Betterment
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn’t require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.
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Fees
Fees may vary depending on the investment vehicle selected, account balances, etc. Click here for details.
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Investment vehicles
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Investment options
Stocks, bonds, ETFs and cash
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Educational resources
Betterment offers retirement and other education materials
Terms apply. Does not apply to crypto asset portfolios.
Pros
- No trade or transfer fees
- Good for automated investing
- Customizes users’ portfolios around their financial goals, timeline and risk tolerance
- Users can assign specific investing goals (short- and long-term) to each portfolio and invest using different strategies (less and more risk)
- Quick and easy to set up account
- Able to sync external retirement accounts to your Betterment retirement goal so all your accounts are in one place. Premium plan users get unlimited access to a financial advisor (otherwise, one-time advisor consultations cost a fee ranging from $299 to $399)
- Advanced features include automatic rebalancing, tax-saving strategies and socially responsible investing
Cons
- Base price for investing accounts is $4/month – recurring monthly deposits totaling $250, or total Betterment account balances reaching $20,000, automatically switch you to an annual price of .25% of your investing account balances
- Premium plan requires $100,000 minimum balance
How does a rollover IRA work?
A rollover IRA works through a few simple steps.
Step 1: Decide where to roll over
Start by choosing a financial institution, such as a bank, brokerage or mutual fund company. Be sure to consider things like fees, investment options, account tools and customer support when making your choice. Platforms with automated investing, like robo-advisors, or managed accounts can simplify the process if you prefer hands-off investing.
You’ll also have to choose between two types of IRAs:
- Traditional IRA: Contributions are generally tax-deductible and your savings grow tax-deferred until retirement, which can lower your current taxable income.
- Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free, which can benefit you if you expect to be in a higher tax bracket later.
Step 2: Transfer the funds
You can then request a direct rollover from your old employer’s plan so the funds go straight into your IRA, which keeps your savings tax-deferred and avoids penalties. You can also do an indirect rollover, but the money must be deposited into the IRA within 60 days to maintain its tax advantages.
Step 3: Choose investments
Once the funds arrive, you can decide how to invest them. IRAs usually offer more investment choices than employer retirement plans.
Step 4: Monitor your investments
Check your account regularly to ensure your investments remain aligned with your retirement strategy. Rebalance your portfolio when needed and consider consolidating any other 401(k)s down the road into the same account to simplify management and help your savings grow efficiently.
Rollover IRA FAQs
Is a rollover IRA a good move?
Rolling over your 401(k) into an IRA can simplify your retirement savings, consolidate multiple accounts and give you more investment options while keeping your money tax-deferred.
How long can I keep money in an IRA?
You can keep money in an IRA indefinitely and allow it to grow tax-deferred until you retire and begin withdrawals.
Can you withdraw money from an IRA?
Yes, but withdrawals before age 59½ may be subject to taxes and a 10% early withdrawal penalty, unless an exception applies.
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