Rollovers from Workplace Retirement Plans to IRAs Are Rising but Come With Risks
Rollovers of retirement savings from 401(k)-type workplace plans into individual retirement accounts (IRAs) are increasing, driven largely by the aging baby boomer population. In 2023 alone, $682 billion was rolled over to IRAs—more than triple the amount in the early 2000s—and nearly six million people participated. Financial advisors warn that these rollovers can be costly and often irreversible if mistakes are made. Risks include tax penalties, higher investment fees, and a smaller retirement nest egg. The IRS issued updated guidance on August 12 to streamline the process, while the CFP Board released a guide highlighting common misconceptions about rollovers. One key takeaway is that rolling over funds from a 401(k) into an IRA typically cannot be undone in most cases. However, federal employees with Thrift Savings Plans may have limited options for reversing such moves under specific conditions.
Topics: baby boomers IRAs retirement planning rollovers