Top Five Reasons People Rollover Their 401(k) into an IRA

Summary

If you leave a job, you may have several choices for your old 401(k): leave it where it is, move it to a new employer’s plan, rollover the funds into an IRA, or take a distribution.

Many people consider an IRA rollover because it can provide:

More investment choices
More control over the provider they use
An easier way to consolidate old retirement accounts
Different fees and account features
Access to investments that may not be available in a workplace 401(k)

A rollover is not automatically the right choice for everyone, so it is important to compare your options before moving your retirement savings.

For investors who decide an IRA rollover fits their strategy, iTrustCapital allows investors to rollover funds from previous employer plans into a self-directed IRA with access to thousands of stocks and ETFs, supported cryptocurrencies, and physical gold and silver.

What Is the Difference Between a 401(k) and an IRA?

Before getting into the reasons people roll over a 401(k), it helps to understand the difference between the two accounts.

401(k): An employer-sponsored retirement plan with tax advantages. Employees can contribute a portion of their paycheck, and some employers provide matching contributions. Investment choices are generally limited to the options selected by the plan.
IRA (Individual Retirement Arrangements): A tax-advantaged retirement account you establish through an IRA provider rather than an employer. Depending on the provider and type of IRA, you may have access to a wider range of investments.
- Traditional IRA: Eligible contributions may be tax-deductible, and pretax funds generally grow tax-deferred until withdrawn.
- Roth IRA: Contributions are generally made with after-tax dollars, while qualified distributions can be tax-free.

So why would someone move retirement savings out of an old employer plan? Here are five common reasons people roll over a 401(k) into an IRA.

1. More Investment Options

A 401(k) generally limits you to the investments selected by your employer’s plan. An IRA may provide access to a much broader range of investments, depending on the provider.

That can include:

Individual stocks
ETFs
Bonds
Mutual funds
Cryptocurrency through certain self-directed IRAs
Physical precious metals through certain self-directed IRAs

For investors who want more choice over how their retirement savings are invested, access to a broader range of assets can be one reason to consider a 401(k) rollover to an IRA.

2. More Choice Over Providers and Fees

Rolling over to an IRA does not automatically mean lower fees, but it does give you the ability to choose and compare providers.

When comparing a 401(k) with an IRA, look at:

Administrative fees
Investment-related fees
Available investments
Account features
Services provided

Some employer-sponsored plans may offer lower-cost institutional investments, while IRA costs vary by provider. Compare the total costs and features of both accounts before completing a rollover.

3. Consolidation and Simplification

If you’ve worked for several employers, you may have retirement accounts spread across multiple providers.

That can mean keeping track of multiple:

Account logins
Investment allocations
Fees
Beneficiaries
Statements and account information

Rolling old 401(k)s into a single IRA can make it easier to see and manage more of your retirement savings in one place.

That does not mean every retirement account should be moved. Compare the investments, fees, and features of each account before deciding.

4. More Control Over Your Retirement Strategy

With a 401(k), your employer and plan provider determine the investments and features available to you.

With an IRA, you can choose:

The IRA provider
How your retirement savings are allocated
The investments available through that provider
The account features and services that fit your strategy

Certain self-directed IRAs can expand those choices even further by providing access to assets that may not be available through a traditional workplace retirement plan.

5. 24/7 Access to Crypto Markets With a Crypto IRA

For investors interested in cryptocurrency, a self-directed Crypto IRA can provide access to an asset class that may not be available through a traditional 401(k).

Crypto markets operate 24 hours a day, seven days a week, which means supported cryptocurrencies can be bought and sold:

During traditional market hours
After hours
Overnight
On weekends

At iTrustCapital, investors can buy and sell supported cryptocurrencies 24/7 within a tax-advantaged IRA. For investors who have decided crypto fits within their retirement strategy, rolling funds into a self-directed Crypto IRA can provide access that may not be available through an employer-sponsored 401(k).

Is a 401(k) Rollover to an IRA Taxable?

A properly completed rollover from a traditional 401(k) into a traditional IRA generally does not create an immediate taxable event.

One way to complete the process is through a direct rollover, where eligible retirement funds are transferred directly from the employer-sponsored plan to the receiving IRA. Because the money is not paid directly to you, federal income tax generally is not withheld from the transfer amount.

If an eligible taxable distribution is instead paid directly to you, the plan generally must withhold 20% for federal income taxes, even if you intend to roll the money into an IRA afterward. You generally have 60 days to complete an eligible rollover.

Different tax consequences can also apply if you move pretax 401(k) assets into a Roth IRA, since that is generally treated as a Roth conversion.

Because individual circumstances vary, consider consulting a qualified tax or financial professional before completing a rollover.

Can You Roll a 401(k) Into a Crypto IRA?

If your employer-sponsored retirement plan is eligible for a rollover, you may be able to move those funds into a self-directed Crypto IRA.

401(k)s commonly become eligible for rollover after you leave the employer sponsoring the plan. Some plans may also allow an in-service rollover under certain circumstances, so you should check with your plan administrator to determine whether your funds are eligible.

At iTrustCapital, eligible clients can roll funds from a previous employer plan into a self-directed IRA. Once the rollover is completed and the funds become available in the account, they can be used to buy and sell supported cryptocurrencies and precious metals.

A rollover is separate from an annual IRA contribution, so an eligible rollover generally does not count toward your annual IRA contribution limit.

Taking Control of Your Retirement Future

Rolling over an old 401(k) into an IRA can give you more flexibility over where your retirement savings are held, what you can invest in, and how your accounts are managed.

At iTrustCapital, investors can access 100+ cryptocurrencies, 10,000+ stocks and ETFs, and physical precious metals like gold and silver within a tax-advantaged retirement account.

You can also access Q, iTrustCapital’s suite of AI-formulated quantitative trading strategies. The goal of Q is to help grow your portfolio through an automated, rules-based approach to crypto rather than relying on emotion or trying to time every move yourself.

You choose the strategy you want to use, activate it in your account, and let Q do the work. From there, Q follows predefined rules and market signals to automatically buy and sell supported cryptocurrencies as market conditions change.

Explore Q and see the available strategies.

Ready to put your old 401(k) to work? Rollover your 401(k) to an iTrustCapital IRA today.

Frequently Asked Questions

Why do people roll over a 401(k) into an IRA?

People may roll over an old 401(k) into an IRA to access different investment options, consolidate retirement accounts, choose their own IRA provider, or gain more control over how their retirement savings are invested. Certain self-directed IRAs can also provide access to alternative assets, including cryptocurrency and precious metals. However, a rollover is not automatically better than leaving money in a 401(k), so fees, investments, services, distribution options, and other account features should be compared first.

Can I roll my 401(k) into an IRA without paying taxes?

A properly completed rollover from a traditional 401(k) into a traditional IRA generally does not create an immediate taxable event. A direct rollover can allow the eligible funds to move directly between retirement accounts without the mandatory federal income tax withholding that generally applies when an eligible taxable distribution is paid directly to you. Different tax consequences may apply when moving pretax assets into a Roth IRA.

Can I roll a 401(k) into a Crypto IRA?

If your 401(k) is eligible for a rollover, you may be able to move the funds into a self-directed IRA that provides access to cryptocurrency. Eligibility depends on your circumstances and the rules of the employer-sponsored plan. With an iTrustCapital Crypto IRA, eligible retirement funds can be used to buy and sell supported cryptocurrencies and precious metals within a tax-advantaged IRA.

Does rolling over a 401(k) count toward my IRA contribution limit?

Generally, no. An eligible rollover from a 401(k) into an IRA is separate from an annual IRA contribution, so the rollover itself generally does not count against your annual contribution limit. The transaction still needs to meet applicable IRS rollover requirements.

Is an IRA always better than a 401(k)?

No. An IRA may provide different investment choices, providers, and account features, but a 401(k) can have advantages of its own, including potentially lower-cost institutional investments and certain federal protections. Before completing a rollover, compare the investments, total fees, services, distribution options, and other features of both accounts.

Can I leave my 401(k) with my old employer?

In many cases, yes, although the options available to you can depend on your account balance and the terms of your former employer’s plan. Keeping the account may make sense if you are satisfied with its investment choices, costs, and other features. You can compare those benefits with an IRA or your new employer’s plan before deciding whether to move the funds.

Some taxes and conditions may apply.

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Disclaimer

This content is for informational purposes only and does not constitute investment, trading, tax or legal advice. It is not an offer to buy or sell any cryptocurrency, digital asset, precious metal, stock or ETF or to participate in any particular investment strategy, including any Q strategy.

iTrustCapital is a fintech software platform for alternative and traditional assets. iTrustCapital is not an exchange, funding portal, custodian, trust company, licensed broker, dealer, broker-dealer, investment advisor, investment manager or adviser. iTrustCapital is not affiliated with and does not endorse any particular digital asset, cryptocurrency, precious metal, stock or ETF. Digital assets and other alternative assets are highly volatile, speculative investments that may become illiquid and may lose some or all principal value. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Asset allocation/diversification does not guarantee a profit or protect against loss. Investing involves risk and you may experience gains or losses regardless of strategy chosen. iTrustCapital makes no representation that any Q strategy will be profitable, achieve any particular result or avoid losses. iTrustCapital makes no representation that any Q strategy will be profitable, achieve any particular result or avoid losses. No investment is completely risk-free, and every investment carries the potential for losing some or all of the principal amount invested regardless of strategy or asset selected. Past performance is not an indication or guarantee of future results. Digital assets are not legal tender backed by the U. S. government and are not subject to FDIC insurance. Digital asset deposits held with institutional storage providers are never FDIC insured and may lose value. Clients do not receive a choice of custody partner. Access to stocks and ETFs is provided by an SEC registered broker-dealer, a member of FINRA and SIPC.

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