TD Ameritrade Holding Corp. (AMTD), E TRADE Financial Corporation (ETFC): Reasons to Make This Rare Retirement Choice

3. You can cut costs.
Perhaps the best scenario in which to roll over old 401(k) money to a new employer’s plan is when the new employer’s 401(k) investment options are cheaper and better than you’ll get in an IRA. The GAO study found that 401(k) plans often have access to lower-cost institutional share classes of mutual funds, with fees that are much lower than you’ll find among the share classes available to most individual investors. For instance, fund companies Franklin Resources, Inc. (NYSE:BENand AllianceBernstein Holding LP (NYSE:AB) have retirement-share classes available through 401(k) plans with no upfront sales charge, but the same shares offered to individuals can come with sales loads of up to 5.75%. If you like those funds and they’re available in your new 401(k), then it makes far more sense to get access to the cheaper share option.

Make the right choice
The downside of rolling over old 401(k) money to a new employer’s plan is that you lose the complete flexibility that a rollover IRA provides, as you’re limited to the plan’s investment options. In some cases, that’s too high a price to pay for the convenience of having all your money in one place. But if your new plan has good low-cost investment options, then you should definitely consider the benefits of having the bulk of your retirement assets in one easy-to-manage location.

The article 3 Reasons to Make This Rare Retirement Choice originally appeared on and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends TD Ameritrade. The Motley Fool owns shares of TD Ameritrade.

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