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Retirement

Ready for a Rollover? We Make It Easy

Rolling over your retirement funds should be as smooth as possible, so your money can continue to grow. Betterment can help make it easy –– and low cost.

MP Dunleavey

By MP Dunleavey

Published: September 13, 2013 | Updated: February 23, 2018

We don't require any forms or paperwork to open a rollover IRA.

Our investing costs are among the lowest in the industry because our portfolio is comprised of inexpensive ETFs.

rollver ira bettermentPop quiz: You’ve got a 401k from an old employer, and you need to deal with it. You should:

(A) Call the company and get the dang thing rolled over, stat.

(B) Ignore it for a really long time, until your spouse or advisor shames you into dealing with it.

(C) None of the above. You actually have no idea how to roll over anything, so you cashed it out.

It’s sad (or scary), but many people would pick B or C, according to a 2013 survey by Aon Hewitt, a human resources consulting company: Crazy as it sounds, some 43 percent of employees cash out their 401k plans when they leave their jobs; another 28 percent simply leave the 401k with their old provider. That’s a shame, as IRA rollovers are crucial wealth builders.

Know your choices

But there’s more to the story: Even if you’re on top of your rollover process, you may not be getting the help you need from your plan provider when you leave your job and have to transfer your funds, according to a 2013 Government Accounting Office (GAO) report.

Some companies don’t explain all your rollover options.The study found that when employees want to roll over their 401ks, many company reps don’t explain all the possible options (i.e. that you can leave your money where it is, or roll it over to your new employer plan). Mainly, people are encouraged to roll over their accounts to an IRA within the same institution, whether or not that’s the best choice.

Ideally, rolling over your retirement funds should be as smooth as possible, so your money continues to grow. Instead, for many people, it’s overwhelming, complicated, and time-consuming. Here’s a summary of what the GAO found in an undercover investigation of the rollover process with the 30 biggest 401k providers. We use Betterment’s method as a point of comparison.

TOP 401k PROVIDERS

BETTERMENT

Long waits, misleading information. Most rollover packets ranged from one to 15 pages; but many didn’t include forms for rolling over the actual funds. Completing a rollover could take weeks or even months.

Speed and efficiency. Betterment doesn’t require any forms or paperwork to open a rollover IRA. In fact, you can get your IRA set up in seconds.

Higher fees, poor disclosure. In many cases, rollover IRA charges are higher compared to a 401k, but not all companies bothered to inform employees. In one case the fees were disclosed at the end of a 49-page document.

Low costs. It’s free to set up a rollover IRA (although you may incur some charges when you close your 401k). We don’t charge trading fees, and our investing costs are among the lowest in the industry because our portfolio is comprised of inexpensive ETFs.

Little or no guidance. In several cases, companies misled customers on key points:12 of the 30 cast doubts about the employee’s ability to roll over funds to their new employer’s 401k (in fact a standard option); seven said there were no fees to open or maintain a rollover IRA, when there were.

Hands-on customer service. Betterment designed the rollover process to be as smooth as possible, so that all instructions are clear—via email and phone—and you can always talk to a real person to sort out any problems.

The GAO report strongly urged the Department of Labor to fix these flaws in the system—and they should. When you’re saving for retirement, you should have full control over your funds, and access to supports that allow your money to grow without interruption. Then you can focus on something that’s even more important: your quality of life.

When deciding whether to roll over a retirement account, you should carefully consider your personal situation and preferences. The information on this page is being provided for general informational purposes and is not intended to be an individualized recommendation that you take any particular action.

Factors that you should consider in evaluating a potential rollover include: available investment options, fees and expenses, services, withdrawal penalties, protections from creditors and legal judgments, required minimum distributions, and treatment of employer stock. Before deciding to roll over, you should research the details of your current retirement account and consult tax and other advisors with any questions about your personal situation.

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