Best Rollover IRA Providers for 2022

In the past, job-hopping was a bit of a taboo. But times have changed, and most millennials aren’t afraid to change jobs—or even careers when it makes sense. In fact, some millennials are now even taking mini-retirements in their 20s or 30s to achieve greater work-life balance and shift their focus. 

Wherever life takes you, your retirement plan should follow. If you have a 401(k) through an employer, it’s easy to transfer your money into another account (e.g, to a rollover IRA) when you switch jobs. This process is called a 401(k) rollover. It might sound complicated, but keep reading and you’ll learn it’s really not that difficult at all. 

Best IRA accounts for rollovers 

  1. Charles Schwab
  2. TD Ameritrade
  3. Vanguard
  4. Ally Invest
  5. Fidelity
  6. Betterment
  7. Merrill Edge

Here are some of the top online brokers to look into when considering a new account.

1. Charles Schwab 

Account minimum: $0 IRA, $5,000 for Schwab Intelligent Portfolios 

Commissions: $0 per trade (IRA), 0% management fee (Intelligent Portfolios)

Schwab is one of the most widely used brokers on the market, offering a simple rollover service.

With Schwab, you’ll get access to a low-cost IRA with the option to benefit from a robo-advisor-assisted managed service if you need a little help. Schwab offers a powerful mobile app and excellent research tools that provide easy access to data. 

If you’re looking to sweeten the pot a bit, Schwab offers up to $500 in bonuses for opening an account.

2. TD Ameritrade 

Account minimum: $0

Commission: $0 per trade 

TD Ameritrade makes it fast and easy to open a rollover IRA in just a few minutes. You can choose from a variety of investment products and benefit from free investment tools and financial calculators. For example, check out their free 401(k) analyzer tool to see how much you can save.

TD Ameritrade offers up to $2,500 in bonuses for opening an IRA or brokerage account. Like most major providers, the company offers no-transaction-fee trades, letting you stretch your retirement funds a bit further.

3. Vanguard 

Account minimum: $0

Commission: $0 per trade 

Vanguard offers high quality funds at ultra-affordable prices. In fact, they are especially known for offering affordable index funds, mutual funds, and exchange-traded funds (ETFs). Check out Vanguard’s three-step rollover process here to learn more.

4. Ally Invest 

Account minimum: $100

Commission: 0.0%

Ally Invest is a great option for people who want a hands-off approach to investing. The company offers a wide selection of options, a high-quality platform that makes it easy to check your account balance, and easy integration with Ally Bank. 

Use Ally if you want a simple and effective way to track your IRA. Pricing is great, and you’ll benefit from no annual nor monthly maintenance fees. As an added bonus, you’ll have access to customer support via phone, chat, or email. 

Ally also offers a separate promotion that pays up to $3,500 depending on how much you invest. This promotion is not tied to their rollover IRA program, but you can still potentially benefit from it if you’re going to be parking your funds there anyway.

5. Fidelity 

Account minimum: $0

Management fee: Up to 0.35% 

Fidelity has one of the most complete trading platforms on the market. This platform is better for intermediate to advanced investors who are looking for a professional-grade service. Fidelity provides access to many different investment options, making them a great choice for an IRA rollover.

6. Betterment 

Account minimum: $0

Management fee: 0.25%

Betterment claims to offer 60% lower fees for rollover IRAs, along with access to licensed experts and a variety of investment products. So if you’re looking for a low-fee platform along with guidance from a strong customer support team, this platform may be perfect for you.

7. Merrill Edge 

Account minimum: $0

Commission: $0 per trade 

Merrill Edge is another premium rollover IRA provider, which operates through Bank of America. One aspect that sets Merrill Edge apart is the fact that you can access services at over 4,300 nationwide brick-and-mortar locations. The company also offers powerful research tools and unlimited commission-free ETFs and stock trades. 

If you open an account with Merrill Edge, you can receive up to $600 in bonuses.

What happens to your 401(k) when you switch jobs?

No matter what you’re aiming to do in the near future, it’s important that you always prioritize retirement planning. Whether you’re in between jobs or on a sabbatical, here are some common options you may have when it comes to your former employer’s 401(k) plan. 

Keep your 401(k) open 

In some cases, your employer may allow you to keep your 401(k) open and leave it where it is. The company won’t continue contributing to it, but you may still have the option to keep the account open. 

Transfer your 401(k) to another employer-sponsored plan

Some companies allow you to transfer your 401(k) money to a new employer-sponsored plan. Check with your HR department to see if this is an option.

Transfer your 401(k) to a rollover IRA

If you choose not to keep your 401(k) open or transfer your money to another 401(k), the third option is to transfer the funds into an individual retirement account (IRA). In some cases, you may be able to roll your funds into an existing IRA. But just to be safe, you may want to open a new IRA altogether.

Can you cash out a 401(k)?

You are legally allowed to cash out your 401(k) savings and liquidate the money for spending. However, this is not a good idea for a few reasons. 

First and foremost, you’ll lose your hard-earned retirement savings. This money is for retirement and tax-free or tax-deferred growth—not for spending freely. 

At the same time, you’ll face early withdrawal penalties from the IRS, and you’ll have to pay taxes on the money.

When switching jobs, the IRS gives you a 60-day window to transfer your 401(k) holdings to a new tax-advantaged retirement account. If you don’t comply, you’ll potentially face fines and other penalties.

How a rollover IRA works

When you opt for a rollover IRA, you assume full control over your 401(k) holdings. Your account changes from an employer-sponsored plan to a self-managed plan. 

This means you have full control to partner with the IRA provider of your choice, which we’ll cover in just a bit.

When it comes time to move your money, you’ll find there are two ways to transfer 401(k) funds into an IRA. 

Indirect transfer

With an indirect transfer (or indirect rollover), your former employer’s bank writes a check and sends it to you. You’ll have 60 days to put it into a new tax-advantaged account. 

If you take this approach, the company will withhold 20% of your money for tax purposes. This is an IRS requirement, and there are no ways around it. This means you’ll have to come up with that money on your own, which can be difficult if it’s a substantial amount. 

Assuming you can pay it, you’ll get the 20% back. If you fail to do so, you’ll risk penalties and taxes, and your account will lose its tax-advantaged status.

Direct transfer 

The other option is to conduct a direct transfer. In this case, the bank automatically transfers your 401(k) holdings into the IRA. All you have to do is execute the transaction. 

A direct transfer is completely seamless, and you shouldn’t have to come up with any extra money out of pocket. For these reasons, you should strongly consider taking this approach when doing an IRA rollover. 

Now that you have a basic idea of how an IRA rollover works, let’s take a closer look at some of the leading providers in the market. 

Tips for a successful rollover 

As the above examples show, there are many options to consider when selecting a brokerage firm for your IRA account. These are just a few of the thousands of brokers available in the United States, so it’s critical to shop around and find one that’s right for you.

Here are some tips to help you make the right decision.

Read the fine print

Scour the fine print before signing up for a broker so it’s abundantly clear what you’re signing up for ahead of time. Watch out for claims about free trades, broad language, and misleading advertising. 

Keep in mind that just because an IRA account has no costs for the actual rollover, you’ll most likely encounter administrative fees from the provider in some form or another. For example, you should look into monthly maintenance fees and annual fees, both of which are common.

After you read all the supporting information online, pick up the phone and try to talk with an agent. Don’t be afraid to ask hard-hitting questions about fees and press them for details on nebulous language. This is a major decision, so you need to make sure you don’t leave any stone unturned.

Look for incentives 

As some of the above examples indicate, brokers occasionally offer incentives for opening either IRA or brokerage accounts.

Again, this is where it pays to look at the details. Most companies offering bonuses tend to have high deposit transfers. However, if you’re rolling over a 401(k), chances are you have a substantial amount of cash saved up. 

Use your head

The majority of brokers now offer commission-free trading and $0 minimums. While both of these are great, they are only surface-level metrics and may not help you all that much in the grand scheme of things.

For example, if you are opening a retirement account, you’ll probably be focusing on long-term stocks that you buy and hold awhile. Most people don’t day trade with their retirement accounts. As such, a $0 commission rate is nice, but it only really helps you if you’re trading frequently. 

In addition, a $0 minimum only really applies to those who are opening an account for the first time. If you are doing a rollover, you already have money in your account. However, some brokers like Schwab do have higher balance requirements for select accounts. So it’s still a good idea to look into minimum balance requirements before opening an IRA account.

Consult with a tax professional

If you are doing a 401(k) rollover, you’ve been investing for a while—either months or years. However, that doesn’t mean you’re an investment professional. There might be important things you are missing out on. 

Now that you’re going through a rollover, it’s a good idea to take a step back and have someone step in to assess your portfolio and offer their independent opinion. Consider working with a tax professional or a personal finance professional who can guide you through the rollover process and help you make improvements to start generating more money.

Frequently Asked Questions

Are mutual funds good for retirement accounts?

Mutual funds can be a great addition to a retirement portfolio, as they let you own baskets of securities. In other words, when you invest in a mutual fund, you own many different companies instead of just one at a time. This is a way to diversify your portfolio and increase your earning potential. 

Just keep in mind that mutual funds can have high fees—especially when you sell them. Mutual funds are typically actively managed, meaning they have an account manager who tweaks them to try to outperform the market—a strategy that often jacks up the price of the mutual fund while leading to mixed results.

Always look at a mutual fund’s prospectus or overview so there are no surprises.

Can you roll a traditional 401(k) into a Roth IRA?

You can choose between either a Roth IRA or a traditional IRA in a rollover, regardless of whether you have a traditional or Roth 401(k).

However, from a tax perspective, it typically makes more sense to roll over from a Roth account to a Roth account, and from traditional 401(k) to traditional IRA. If you go from a traditional plan to a Roth IRA, you may have to pay taxes on the amount you convert.

Again, this is where it pays to have the advice of an investment advisor who can walk you through the process and minimize taxes during a rollover IRA.

Should I cash out my 401(k) or do a rollover?

The short answer is that you definitely need a retirement plan. If you attempt to cash out instead of doing a rollover, you’ll receive a heavy fee and have to pay taxes. It makes far more sense to keep the money in a tax-advantaged account and to continue planning for retirement. 

The Bottom Line

Opening a rollover IRA is nothing to stress over. Understand your options and consider working with a certified financial planner or tax professional to walk you through the process if you’re overwhelmed.

Remember that it’s better to ask for advice from a professional than to attempt a rollover on your own and risk making a mistake. 

If your goal is achieving financial independence, retirement planning needs to take center stage in your life. Luckily, we live in an age where you can travel the world, move from job to job, or do whatever else you want while keeping close tabs on your retirement accounts from the palm of your hand.

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