Should I Roll Over My 401(k) to an IRA After Leaving My Job?

Should I Roll Over My 401(k) to an IRA After Leaving My Job?

Should I Roll Over My 401(k) to an IRA After Leaving My Job?

Leaving a job often comes with a long to-do list—health insurance, taxes, new benefits—and right in the middle of it sits a big financial question:

“Should I roll over my 401(k) into an IRA?”

It’s one of the most common retirement-related decisions we help clients navigate at Pearl Wealth Group, especially for people in their 50s and early 60s preparing for retirement. And while the answer is: “It depends,” this guide will help you understand your options—and when a rollover might be the smart move.

What Is a 401(k) Rollover?

A 401(k) rollover is the process of moving the assets in your employer-sponsored retirement plan into another tax-advantaged account—typically an IRA (Individual Retirement Account).

This is a tax-free transfer as long as it’s done properly, and it can give you more control over how your retirement money is invested, withdrawn, and taxed.

Pros of Rolling Over Your 401(k) to an IRA

✅ 1. More Investment Options

Most 401(k) plans offer a limited menu of mutual funds. By contrast, IRAs allow access to:

• Individual stocks and bonds
• ETFs and index funds
• Alternative investments This flexibility can help you fine-tune your portfolio as you approach retirement.

✅ 2. Lower Potential Fees

Some 401(k) plans have high administrative costs or pricey investment options. IRAs often have lower expense ratios, especially when working with a fiduciary advisor who helps you choose cost-efficient options.

✅ 3. Easier to Consolidate Accounts

If you’ve changed jobs a few times, you may have multiple old 401(k)s floating around. Consolidating them into one IRA can make it easier to manage your investments, rebalance, and withdraw income in retirement.

✅ 4. Better Control Over Taxes and Withdrawals

IRAs offer:

• More flexible withdrawal strategies
• Better Roth conversion opportunities
• Greater control over required minimum distributions (RMDs) planning

When you work with a firm like Pearl Wealth Group, we help clients use IRAs to build tax-efficient income strategies—especially valuable if you’re retiring in a high-income bracket.

When You Might Not Want to Roll Over

Despite the advantages, rollovers aren’t always the best move. Here are some times when staying in your 401(k) makes more sense:

🚫 1. You’re 55 and Need Early Access

If you leave your job at age 55 or older, you can access your 401(k) penalty-free. IRAs don’t allow withdrawals until age 59½ without a 10% penalty (with few exceptions).

So if you plan to tap your retirement funds before 59½, consider waiting to roll over.

🚫 2. You Have Outstanding Loans on Your 401(k)

Rolling over a 401(k) with an outstanding loan will trigger taxable income and possibly a 10% penalty unless you repay the loan quickly.

🚫 3. You Work for a Government or Public-Safety Employer

Some public-sector employees have unique pension or 457(b) benefits. These accounts can have more flexible withdrawal options than a traditional IRA.

IRA vs 401(k): Side-by-Side Comparison

Tax Planning Tip: Use the Rollover to Strategize

A rollover isn’t just about simplifying—it’s a great tax planning opportunity, especially for people with $1M–$2.5M saved for retirement.

Here’s how we help our clients at Pearl Wealth Group:

• Coordinate Roth conversions in low-income years (like the gap between retirement and taking Social Security)
• Plan IRA withdrawals to avoid spiking into a higher tax bracket later
• Use tax-efficient asset location (putting bonds in IRAs, growth stocks in taxable accounts)

How to Roll Over Your 401(k) Properly

Done wrong, a rollover can trigger unexpected taxes. Here’s how to avoid that.

🚫 Don’t: Take the Check Yourself

If your 401(k) provider sends the funds directly to you, 20% will be withheld for taxes, even if you intend to move the money right away.

✅ Do: Use a Direct Rollover

This is where the money moves directly from your 401(k) provider to your IRA custodian. It’s simple, clean, and avoids taxes or penalties.

Want help doing this the right way? We handle rollovers for our clients, making sure they’re smooth, tax-efficient, and tailored to your retirement goals.

When Should You Roll Over?

There’s no one-size-fits-all answer. But here are a few common scenarios where it’s worth considering:

• You’re retiring or starting a new job and want to consolidate accounts
• You’re unhappy with your 401(k) investment options or fees
• You want to build a Roth conversion strategy
• You’re working with a fiduciary advisor who can help optimize income from your IRA

Final Thoughts

Rolling over a 401(k) to an IRA can give you more control, more investment options, and better tax planning opportunities—but it’s not the right move for everyone.

At Pearl Wealth Group, we specialize in helping individuals in their 50s and 60s create personalized retirement income plans using rollovers, Roth strategies, and smart drawdown plans.

If you’re unsure whether a rollover makes sense for you, let’s talk. We’ll walk you through the options and help you make the best decision for your future.

👉 Schedule your complimentary Retirement Rollover Call now

🔍 Frequently Asked Questions

1. Will I pay taxes if I roll over my 401(k) to an IRA?

Not if you do a direct rollover. The funds move from your 401(k) to your IRA without triggering any taxes. But if you take possession of the money yourself, it may be taxed and penalized.

2. Can I roll over a Roth 401(k) into a Roth IRA?

Yes—but be careful. While it’s tax-free, the 5-year rule resets for Roth IRAs unless you already have one established. Talk with your advisor to avoid surprises.

3. Can I roll over multiple 401(k)s into one IRA?

Absolutely. Consolidating old 401(k)s into a single IRA can make your retirement accounts easier to manage and monitor.

4. Do I need to roll over right away after leaving my job?

No rush—but ideally, you want to do it within 60 days if you take possession of the funds. A direct rollover removes that deadline entirely.

5. How do I know if it’s the right move for me?

That’s what we’re here for. At Pearl Wealth Group, we help you weigh the pros and cons based on your retirement timeline, tax situation, and long-term goals.