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Ask the Experts: Should You Consider a Reverse Rollover from Your IRA to Your New 401(k) Plan?

Cyrus ColeSaturday, Feb 22, 2025 10:39 pm ET
2min read


You've landed a new job with an impressive 401(k) plan, and now you're wondering if it makes sense to roll over your existing Individual Retirement Account (IRA) into this new plan. A reverse rollover, as it's known, can be a strategic move, but it's essential to understand the potential benefits and drawbacks before making a decision. Let's explore the advantages and disadvantages of a reverse rollover and consult with financial experts to help you make an informed choice.

Advantages of a Reverse Rollover

1. Delayed Required Minimum Distributions (RMDs): If you're still working and your new employer's 401(k) plan allows it, you can delay RMDs until you retire. This can help keep your income in retirement lower, potentially pushing you into a lower tax bracket.
2. Potential for lower fees and better investment options: Your new 401(k) plan might offer institutional investment options with lower expense ratios than those available in your IRA, allowing your money to grow more efficiently.
3. Easier access to loan options: Some 401(k) plans allow loans, which can be useful in case you need to access your retirement funds for emergencies or other purposes. IRAs do not allow loans.
4. Simplified account management: Consolidating your retirement savings into a single account can make it easier to manage and track your investments.

Disadvantages of a Reverse Rollover

1. Limited investment options: While 401(k) plans may offer some advantages, they typically have fewer investment options compared to IRAs. This can limit your ability to diversify your portfolio or access specific investments you prefer.
2. Potential loss of control over investments: When rolling over funds from an IRA to a 401(k) plan, you may lose some control over your investments, as the 401(k) plan's investment options and rules may be more restrictive.
3. Potential loss of Roth IRA benefits: If you have a Roth IRA, you may lose the benefits of tax-free withdrawals and growth by rolling over funds to a traditional 401(k) plan. However, if your new 401(k) plan offers a Roth option, you can still contribute to a Roth account within the plan.



Expert Insights

Sham Ganglani, Fidelity Investments' director of retirement product management, emphasizes the importance of making a decision about where you would like your money to go. "You're in the driver's seat," he says. "It's important to make a decision about where you would like your money to go."

Joe Conroy, a certified financial planner and owner of Harford Retirement Planners, suggests considering a reverse rollover if you want to delay RMDs or perform a backdoor Roth IRA conversion. However, he warns that not all employer-sponsored plans accept reverse rollovers, so it's crucial to check with your plan administrator.

Nick Rygiel, a certified financial planner and owner of Ironclad Financial, highlights the potential benefits of a reverse rollover, such as stronger creditor protection and easier access to penalty-free withdrawals. However, he also emphasizes the importance of understanding the specific rules and requirements of your new 401(k) plan.

Conclusion

A reverse rollover from your IRA to your new 401(k) plan can offer several potential benefits, such as delayed RMDs, lower fees, and easier access to loans. However, it's essential to weigh the advantages and disadvantages and consider your personal financial situation and goals. Consulting with a financial advisor can help you make an informed decision and ensure that you're taking full advantage of your new employer's 401(k) plan.
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KookyPossibleTheme
02/23
Rolling over to a 401(k) simplifies accounts. One less thing to worry about, but watch those investment limitations.
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Progress_8
02/23
My strategy: Hold some IRA, 401(k) for work stuff. Spread risk and keep options open.
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Buffet_fromTemu
02/23
@Progress_8 What’s your time horizon for holding the IRA and 401(k)? Are you thinking long-term or taking a more tactical approach?
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birdflustocks
02/23
401(k) plans like a Swiss Army knife – loans, lower fees, and RMD delay. But watch those investment restrictions.
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enosia1
02/23
@birdflustocks True, 401(k) plans have perks, but watch that lock-in effect.
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PlentyBet1369
02/23
Reverse rollover? 🤔 Check fees & investment options first.
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Mr_Biddz
02/23
@PlentyBet1369 Yeah, fees matter, bro.
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Miguel_Legacy
02/23
@PlentyBet1369 Check fees & options? Solid move.
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applesandpearss
02/23
Reverse rollovers like transferring cash, but watch those RMDs. Could save you a lot in taxes later. 🚀
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discobr0
02/23
401(k) loans? Handy for emergencies, but watch the interest.
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Didntlikedefaultname
02/23
If you're still working, delaying RMDs could lower your tax bill in retirement. That's a nice bonus.
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destroyman26
02/23
@Didntlikedefaultname True, delaying RMDs can lower your tax bill. But watch out for the 401(k) plan's investment options; they might be limited compared to your IRA.
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zarrasvand
02/23
IRA to 401(k): Consolidation can simplify retirement planning.
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xX_codgod420_Xx
02/23
Access to penalty-free withdrawals is a good thing. Just make sure you understand the rules and conditions.
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LividAd4250
02/23
Diversification matters; 401(k)s may limit investment choices.
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ConstructionOk6948
02/23
@LividAd4250 True, 401(k)s can be limiting.
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PunchTornado
02/23
Fidelity's Ganglani says you're in control. Make sure you know what you're doing before making a move.
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surveillance_raven
02/23
IRAs offer flexibility, but 401(k) consolidation simplifies the pic. Check those investment options before rolling over.
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Buffet_fromTemu
02/23
Diversification is key. 401(k)s might limit investments. Make sure you're not locking yourself into a bad deal.
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dritu_
02/23
@Buffet_fromTemu True, 401(k)s might limit options. Diversifying outside the plan could be wise if you spot better opportunities elsewhere.
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Running4eva
02/23
@Buffet_fromTemu LOL, bad deal? Nah, just careful, bro.
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Alert-Reveal5217
02/23
401(k) loans? Handy for emergencies. But IRAs, no loans. Think about your needs before rolling over.
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anonymus431
02/23
@Alert-Reveal5217 Yeah, gotta consider your needs, bro.
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thelastsubject123
02/23
@Alert-Reveal5217 True, 401(k) loans can be a lifeline, but IRAs are loan-free. Think before you roll.
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Hoshigetsu
02/23
Roth IRA benefits are valuable. Check if your new 401(k) offers a Roth option to avoid losing those perks.
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