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Retirement Savings Flows and Financial Advice: Should You Roll Over Your 401(k) Plan?

Date Published: 
Tuesday, April 1, 2014
Source/Author: 
Pension Policy Center (April 2014)

This paper addresses several issues relating to rollovers from 401(k) plans to IRAs, including the extent of inertia among pension participants, the extent to which defaults (which are to not rollover) are effective in influencing behavior of participants, the extent of financial errors made by pension participants, the quality of advice pension participants are receiving (and how that may be affected by conflicts of interest), the appropriate advice for pension participants considering rollovers to an IRA, and the level of responsibility that financial institutions have in advising participants to roll over their 401(k) plans. The paper argues that participant inertia has been overcome by major advertising campaigns encouraging rollovers, by cash bonuses to participants, and by an effort to make rollovers easy to do, combined with a lack of sensitivity of participants to fees.

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