IRS Moves to Make 401(k) Rollovers Easier, But Experts Warn: ‘You Can’t Go Back’

New IRS guidance is aimed at making 401(k) rollovers easier, but financial professionals are warning savers to understand the consequences before moving retirement money into an IRA.

The IRS issued the guidance Aug.

12 to "simplify, standardize, facilitate, and expedite" rollovers, while the CFP Board released a rollover guide Aug.

19 highlighting common misconceptions about whether workers must move their money after leaving a job and whether the decision can be reversed.

The IRS guidance includes sample forms and proposed procedures for rollovers between retirement plans and between retirement plans and IRAs, but not IRA-to-IRA transfers.

Use of the sample forms is optional for plan sponsors.

Treasury and the IRS are also seeking public comments on the proposed procedures through Oct.

23, 2026.

Millions of Americans move retirement money from workplace plans into individual retirement accounts each year.

Investors rolled $682 billion into IRAs in 2023, while nearly 6 million people made rollovers, up from about 4 million in the early 2000s.

Rollover Mistakes Can Be Costly "There are pros and cons" to moving money from a 401(k) into an IRA, Ellen Lander, founder of Renaissance Benefit Advisors Group, told CNBC. "My biggest beef is, I don’t think they’re discussed enough." The CFP Board guide says workers do not necessarily have to move their money after leaving a job.

Roughly 77% of 401(k) plans have less than half of retirees keep their assets in the employer plan.

A rollover may also be difficult to reverse. "In most cases, you can’t go back to whence you came," certified financial planner Brenton Harrison told CNBC.

Read Also: Mike Pence Warns Trump 'The Last Thing We Need' Is a Canada Trade War, Says Tariffs Could Hurt American Families and Businesses Fees Can Reduce Retirement Savings Financial advisors warn that investment fees can be higher in an IRA than in an employer-sponsored plan.

Employers can use their combined buying power to access lower-cost institutional funds, while IRA investors may face higher-cost retail shares. "You go from being an institutional buyer to a retail buyer," Lander said.

A Pew Charitable Trusts analysis found median retail mutual-fund fees were 0.34 percentage points higher than institutional fees in 2019, a 37% difference.

Investors who retired in 2018 and rolled money into an IRA could face an aggregate $45.5 billion reduction in savings over 25 years because of the fee difference, the study found.

The SEC also provides an example of how fees can affect long-term savings.

On a hypothetical $100,000 investment earning 4% annually for 20 years, an investor paying a 0.25% annual fee would have about $208,000, compared with roughly $179,000 for an investor paying a 1% annual fee, according to CNBC’s report.

The difference is not universal, however.

Some 401(k) plans can have higher fees than comparable investments available through an IRA.

IRAs Offer More Flexibility IRAs generally offer more investment choices than 401(k) plans, while 69% of 401(k) plans offered 25 funds or fewer in 2025. "Having a curated list of investments ‘takes the burden of self-management’ off the investor," Harrison said.

401(k) plans also carry fiduciary protections for investment selection.

Some plans offer withdrawal options and loans that IRAs do not.

Only 52% of 401(k) plans allowed monthly or quarterly installments in 2025, while 68% offered periodic or partial withdrawals. "You can’t borrow from an IRA," Lander said.

Financial professionals also need to consider potential conflicts of interest when recommending a rollover.

The CFP Board guide says rollover advice is subject to fiduciary duties and that advisers should disclose material conflicts, including compensation incentives connected to recommending a rollover.

The guide also says advisers should compare the current employer plan with available alternatives, including costs, investment choices, distribution rules, borrowing options and creditor protection before recommending a rollover.

Retirement saving has continued despite market volatility.

401(k) savings rates reached a record 14.4%, while IRA contributions rose 29% year over year.

Average 401(k) balances were up 11% from a year earlier, while IRA balances increased 7%.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published editors.

Read Also: Ketanji Brown Jackson Slams Supreme Court Mail-In Votes Ruling, Says It ‘Needlessly’ Injects ‘Chaos and Uncertainty’ Into Midterms Photo courtesy: Shutterstock