Dear Liz: I recently changed jobs and wonder what I should do with my old 401(k) account. Should I roll it into an IRA or transfer it to my new employer’s 401(k) plan? Everything I read says an IRA is better because you have more choice in picking investments, but I’m not sure where I should set up the new account. Does it matter?
Answer: You probably would have more investing choices with an IRA, but you might also wind up paying more. A good, large-company 401(k) plan often offers access to institutional funds that charge less (sometimes much less) than what a retail investor would pay for a similar investment through an IRA. If your new employer’s plan is a good one, transferring the money there is often the simplest and most cost-effective solution. Or you may be able to leave the money where it is, if you like the plan. Only if neither option is palatable, or if you’re convinced that you can find better, lower-cost options on your own, does an IRA rollover become the clear best choice.