Three Things to Know If You’re Rolling Over a 401(k)
If you’re in a company 401(k) and approaching retirement, there’s a good chance a rollover IRA is on the horizon. Most firms can handle rollovers, and today there are more investment options than ever before.
But here’s the part many people miss.
Every year, millions of Americans face this exact decision. You’ve spent decades building your 401(k), and now you’re being told to “just roll it over” to an IRA. Simple enough, right?
Not quite. The choices you make during a rollover like what type of firm you use, which advisor you work with, and what investment platform they offer will determine your flexibility, fees, and options for the next 20-30 years of retirement. This isn’t just paperwork. It’s a fork in the road.
1. More Choices Exist, But Not Everywhere
One of the most common frustrations we hear from retirees and small business owners is a lack of investment choices.
That’s not an accident. It’s often by design.
Many 401(k) platforms and large firms limit options to simplify administration, manage liability, or steer assets into preferred products. Convenience for the firm doesn’t always equal flexibility for you.
Here’s what this looks like in practice:
You might walk into a big-name brokerage with $500,000 from your 401(k), expecting access to thousands of investment options. Instead, you’re presented with a curated menu of 30-50 mutual funds, many of which carry the firm’s own brand. Need access to individual bonds, alternative investments, or direct indexing? That might require “special approval” or simply not be available at all.
The reality: True investment freedom requires an advisor who isn’t constrained by proprietary products or limited platforms. If your advisor can only offer what their firm approves, you’re not getting independent advice, you’re getting a sales pitch dressed up as financial planning.
2. The Rollover Determines Your Investment Universe
When you roll over a 401(k), you’re not just moving accounts, you’re choosing:
- The type of firm you’ll work with
- The investment universe available to you
- The level of flexibility in your strategy
This is where independence matters. Some platforms offer 50 mutual funds. Others offer thousands of securities, alternatives, and direct indexing. The firm you choose sets the boundaries.
Understanding the landscape:
There are three main types of firms that handle rollovers:
- Wirehouses and big banks — Household names with branches everywhere. Often limited to proprietary products and house-managed funds. Convenient, but watch the fees and conflicts of interest.
- Independent broker-dealers — More flexibility than wirehouses, but advisors may still face product restrictions or quotas from their parent company.
- Independent RIAs (Registered Investment Advisors) — Fiduciary-only firms with no product sales quotas. Access to the full market, including alternatives, individual securities, and custom strategies.
Bottom line: The custodian and platform you choose now will determine what’s possible for years to come. Choose a firm that expands your options, not one that limits them.
3. The Advisor Matters More Than the Platform
But here’s the thing: The best platform in the world doesn’t help if your advisor can’t use it.
The biggest decision in a rollover isn’t the IRA itself, it’s who you trust with it.
Ask yourself:
- Do I have direct access to the decision-makers?
- Are they independent, or tied to house products?
- Do they have experience across markets, cycles, and strategies?
Because once that rollover is done, the path forward is largely set.
Red flags to watch for:
- “We have a great annuity that solves this.” Annuities can play a role in your finances, but if that’s the first recommendation out of the gate, ask why.
- “Our firm manages everything in-house.” That might mean you’re limited to their proprietary funds, which often times is not the best fit.
- “I’ll need to check with my manager.” If your advisor doesn’t have decision-making authority, you’re not working with the person calling the shots.
Common Rollover Mistakes to Avoid
We’ve been guiding clients through rollovers for over 40 years. Here are the mistakes we see most often:
Mistake #1: Rolling into high-fee products without understanding the costs. Some firms will roll your 401(k) into an annuity or managed account with layers of fees. This includes advisor fees, fund fees, and surrender charges. Make sure you understand what you’re paying and why.
Mistake #2: Not considering a Roth conversion. If you have a Traditional 401(k), a rollover is the perfect time to consider converting some or all of it to a Roth IRA. You’ll pay taxes now, but enjoy tax-free growth and withdrawals in retirement. This strategy works especially well if you’re in a lower tax bracket during the rollover year.
Mistake #3: Doing nothing. Leaving your 401(k) with a former employer might seem easier, but you lose control. If the plan changes, merges, or gets discontinued, you’ll be forced to make decisions on someone else’s timeline, not yours.
The Real Question
A rollover isn’t about finding more options.
It’s about making sure you’re not limited by someone else’s.
Ready to Explore Your Options?
If you’re approaching a 401(k) rollover and want to understand your full range of choices, we can help. At Freedom Capital Advisors, independence means we go where your money is treated best, not where we’re incentivized to send it.
