When you leave a job, you have four options of how to handle your 401(k). You can leave the money with your former employer, roll it over to the new job’s 401(k) plan, if you have a new job, roll it into an IRA, or cash it out.
Cashing out the balance is the worst thing you can do — there are tax penalties, and of course, it will hurt your retirement.
But after that, the Government Accountability Office says, rolling into an IRA is likely the second-worst idea. You cannot take loans out from IRAs, they tend to have higher fees, and they have less fee disclosure than 401(k)s, the agency explained.
The GAO pretended to be a customer, and called 30 401(k) plan companies. It included quotes from the representatives, who strongly suggested they should roll over their balances into the same company’s IRAs.
“Plan participants are often subject to biased information and aggressive marketing of IRAs when seeking assistance and information regarding what to do with their 401(k) plan savings,” the GAO wrote.