Brokers on whether to roll over your 401 (k)
A broker can tell you that rolling your old 401 (k) account into an individual retirement account gives you a lot more investment options, and that’s generally true. But IRAs can cost you more, and 401 (k) have better protections for consumers.
Brokers want to sell you investments that earn them commissions. Generally, they have no responsibility to ensure that these investments are in your best interest. In contrast, a 401 (k) administrator is a trustee, so there is a need to put your interests first and provide good investment options at a reasonable cost. Many 401 (k) s offer access to very low cost institutional funds that are not available in an IRA.
Additionally, your entire 401 (k) balance is protected from creditors. On the other hand, your protections with an IRA depend on state law. Many states only exempt an amount “reasonably necessary for support” – meaning that in some cases, creditors could potentially get everything.
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