Now we will discuss reasons why you should leave those 401(k)s at where they are.
- Sales pitches. Many of the advice you receive from financial service companies are sales pitches, they just want to have more clients with more money to manage
- Lower costs. Large 401(k) plans have access to institution-class funds that typically charge less fees than retail funds (that means if you roll your 401K to an IRA account, even at the same brokerage firm, for the same fund, you could pay higher expense).
- Vetted by pros. The funds in a 401k have been vetted by a team of professionals who have fiduciary duties to employees. For an IRA account managed by yourself, do you have the time and skill to go through thousands fund choices?
- Stable value fund. Many 401(k) plan includes a stable-value fund, those are attractive alternative to money market funds and unlike bond funds, they wouldn't crash if interest rates rise.
- More flexibility. If you need income after a layoff or early retirement, a 401(k) offers more flexibility. For example, if you leave your job after the age 55, you can withdraw money from 401k without incurring the 10% early-withdrawal penalty (you still have to pay tax, though). If you roll the money to an IRA, you will need to wait till age 59.5 in order to take penalty-free withdrawals.