When you leave an employer, rolling your 401(k) into an IRA might seem like the obvious next step for many retirees. But a recent CFP Board guide on fiduciary duty in rollovers warns that rollovers might not be required and could be irreversible.
Cerulli Associates estimates about $941 billion will move from 401(k) plans into IRAs this year, with annual rollover flows projected to reach $1.3 trillion by 2031.
More than 11,000 Americans are turning 65 each day in 2026, according to the Alliance for Lifetime Income, and IRAs already hold approximately $18.2 trillion as of the first quarter of 2026, the Investment Company Institute reports.
The money is moving, and for retirees who don’t fully understand the trade-offs, it may be moving in a direction they can’t predict.
Most 401(k) rollovers to IRAs cannot be reversed
In most cases, “you can’t go back to whence you came,” Brenton Harrison, a certified financial planner based in Nashville, told CNBC. Once funds land in an IRA, the original employer plan will typically refuse to accept them.
Most plans do allow former employees to keep their balance after leaving, yet few retirees take that option.
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In roughly 77% of 401(k) plans, less than half of retirees keep their assets in the employer plan, according to the Plan Sponsor Council of America, a trade group cited in the CFP Board guide.
One exception is the federal Thrift Savings Plan, which accepts rollovers from former federal employees under certain conditions, according to the CFP Board guide.
3 protections retirees lose by rolling a 401(k) into an IRA
Moving retirement savings out of an employer plan can strip away safeguards that are easy to overlook. Here are three that disappear or weaken after a rollover.
1. Institutional fund pricing
Employer plans negotiate lower expense ratios through pooled contributions, while IRAs typically charge higher retail rates for the same funds. The SEC has illustrated that even a gap of 0.75% points on a $100,000 portfolio can cost roughly $29,000 over 20 years.
2. Weaker non-bankruptcy creditor protection
ERISA plans carry unlimited federal creditor protection inside and outside bankruptcy.
Rollover assets in an IRA remain fully protected in bankruptcy under a tracing rule, but outside bankruptcy, protection shifts to state law, which varies widely by jurisdiction and can range from unlimited to a needs-based standard set by the court.
3. Fiduciary oversight of rollover advice
The rule regulating conflicted rollover recommendations was vacated in March 2026, Janus Henderson reported.
In place of the vacated 2024 rule, the DOL has restored the 1975 five-part fiduciary test, a narrower standard that generally does not treat one-time rollover recommendations as fiduciary advice, according to Janus Henderson and the March 20, 2026 Federal Register notice.
5 questions to resolve before signing a 401(k) rollover
Rollover decisions carry real consequences. Brian Wong, assistant general counsel for standards at the CFP Board, explained further in an interview with Financial Planning that “Bad or conflicted financial advice about rollovers can expose the client to unnecessary costs or significant tax penalties.”
Ellen Lander, Renaissance Benefit Advisors Group founder, warns rollover choices need to be discussed more.
“There are pros and cons to the choice to roll over money or keep it in a 401(k) plan … My biggest beef is, I don’t think they’re discussed enough,” Lander said.
These questions can help retirees evaluate whether a rollover is the right move:
Are the IRA’s fees actually lower?
Financial advisors interviewed by CNBC recommend requesting the 401(k) fee schedule and comparing it against the IRA provider’s fund lineup before making the move.
As David Blanchett, a certified financial planner and head of retirement research at Prudential Financial, told the network, “all the money in IRAs is coming from rollovers,” making the fee comparison consequential.
Will my assets lose creditor protection?
Coverage varies by state once money leaves an employer plan, check your state’s IRA creditor protections outside bankruptcy, IRA Financial noted.
Is the person recommending this a fiduciary?
Ask whether they operate as a fiduciary or under the SEC’s Regulation Best Interest standard, Wong said.
Even when a client directs a rollover, advisors must disclose if there is “information that would cause a prudent professional to determine that the rollover is not in the client’s best interests,” as Financial Planning reported.
Related: Vanguard data reveals a troubling Roth gap in your 401(k)
Will I need penalty-free access before 59½?
A rollover eliminates the Rule of 55 option, which allows penalty-free withdrawals from a 401(k) after leaving an employer at age 55 or later.
Do I have a plan to invest the money on arrival?
Vanguard found that 28% of investors who rolled money into a Vanguard IRA in 2022 still held it in cash 12 months later,and that rollover cash left uninvested tends to remain that way for at least seven years.
“The cash drag in IRAs is a widespread, enduring, and costly problem,” wrote Andy Reed, head of investor behavior research at Vanguard.
The 401(k) rollover decision that could reshape retirement income
A 401(k) rollover can be the right choice for some retirees, but it is a decision that deserves careful review before any money moves. Once funds leave an employer plan, important benefits, protections, and options may not be easy to recover.
With rollover activity reaching record levels, retirees should look beyond convenience and compare fees, investment choices, tax considerations, and protections available in both accounts.
The goal is to ensure the IRA move supports a retiree’s long-term financial needs.
Related: What to Know about Including Annuities in Your 401k
