The best places to transfer your 401(k) account in July 2021
If you have a 401(k) account and recently left your job or were laid off due to the coronavirus crisis, you may be wondering what to do with your retirement investments. But even if you left your employer some time ago and still have a retirement account with them, you have several options when it comes to finding the best place to transfer your old 401(k) account:
Brokers: An online broker is a great option if you want to “do it yourself” and use your investment expertise to invest.
Robo-advisors: A robo-advisor is a great choice if you want someone to manage your money at a low overall cost. Robo-advisors often add a number of other great features, such as tax loss harvesting.
Here are the best places to move your 401(k) into an IRA and what you need to know to make a smart decision.
The best online brokers for a 401(k) rollover:
Schwab Intelligent Advisors
Overview: The Best Online Brokers for a 401(k) Transfer in July 2021
TD Ameritrade is a great broker if you’re an active trader looking for professional-level tools to help you invest better. Investors can use the broker’s highly regarded thinkorswim trading platform and trade not only stocks, bonds and ETFs, but also currencies and futures. That said, TD Ameritrade still works great if you’re a long-term buy-and-hold investor.
If you need access to research, you’ll find all sorts of stock and market reports, and you can browse a wide selection of mutual funds with no transaction fees. TD Ameritrade also offers commission-free stock and ETF trading.
(Charles Schwab bought TD Ameritrade, and will eventually integrate the two companies).
Standard pricing for mutual funds: Free for no-load funds; $49.99 for no-transaction fee funds.
Mutual Fund Highlights: More than 4,100 no-transaction fee and no-load mutual funds.
Wealthfront is a great choice if you’re looking for someone to manage your transfer to an IRA. This robo-advisor can create a portfolio based on how much risk you’re willing to take and exactly when you need the money. You’ll get automatic rebalancing to stay on track with your goal, and you’ll pay reasonable fees for the funds you’re invested in.
Wealthfront also offers state-of-the-art tools, including an automated financial planner that can help you track all of your investments, even at other institutions, and see how they work together to achieve your goals. You may also want to consider opening a cash management account, as it can be a great alternative to a bank account, or use it to hold cash until you contribute to your rollover IRA.
Standard pricing: The management fee is 0.25% of assets per year.
E-Trade is a great all-around broker, but it probably stands out for its fundamental research, which can be especially valuable for new investors or those who have no other source of research. If you need a full-featured mobile app, the broker has you covered with its Power E-Trade platform, though it does the basics well too. The broker’s standard pricing for mutual funds is lower, and it also offers thousands of funds with no transaction fees. Plus, ETFs and stocks can be traded commission-free, as is standard for online brokers.
Standard pricing for mutual funds: Free for no-transaction fee funds; $19.99 for no-transaction fee funds.
Mutual Fund Highlights: More than 4,500 mutual funds with no transaction fees and no sales charges.
Fidelity is an exceptional broker in almost every way, but it’s great for beginners or those looking for top-notch customer service. Fidelity’s representatives respond quickly to your questions, which is a big plus for those of you who are just starting out.
Betterment is one of the largest and most popular robo-advisors, and it can take the money in your 401(k) rollover and build a balanced retirement portfolio. Betterment uses funds from 14 different asset classes to build its portfolios, offering a wide range of diversified investments. Plus, if you’re interested in social impact investing, Betterment can add these funds to your portfolio.
Betterment’s funds are inexpensive – on average, they cost about $7 a year for every $10,000 you invest – and they automatically rebalance your account when it deviates more than a few percent from your target allocations. This robo-advisor allows you to buy split units so that all your money is invested and working for you. You can also open a full cash management account that offers a competitive interest rate.
Standard pricing: The management fee is 0.25% of assets per year.
Charles Schwab is strong in all categories and caters to both novice and expert clients. If you’re looking to buy the same mutual funds you had in your 401(k) or buy some of the cheaper variants of the Schwab brand, then the brokerage will likely be up to the task with its thousands of funds with no transaction fees.
The customer service is also excellent, and if you’re looking to trade, you’ll probably find something to like about the highly customizable StreetSmart Edge trading platform. And yes, Schwab also offers free trading on stocks and ETFs, so you can add almost any company to your portfolio.
Standard mutual fund pricing: $0 for Schwab funds or no-load, no-trade funds; otherwise, $49.95.
Mutual Fund Highlights: More than 4,200 no-transaction fee and no-load mutual funds.
Interactive Brokers is great for active and professional traders, but it can also be suitable for retired and beginning investors. While trades are not free, unless you use the broker’s IBKR Lite platform, they are still reasonably priced at only half a cent per share, with a minimum of $1 per trade. The broker also offers competitive pricing for mutual fund trading, but its list of no-transaction-fee funds is the longest in the industry.
Standard pricing for mutual funds: Free for no-transaction-fee funds; otherwise, 3% of the trade value or $14.95 (whichever is less), with a minimum initial purchase of $3,000.
Mutual Fund Highlights: Over 8,300 mutual funds with no transaction fees.
Merrill Edge is a solid overall choice, as it offers a full range of brokerage services. However, it’s a particularly good choice if you’re already a customer of its parent company, Bank of America. That’s because you can access all your accounts in one place and make quick transfers between your bank and brokerage accounts. Plus, you can access Merrill representatives at many Bank of America locations.
Merrill has also reduced commissions on stocks and ETFs to $0, while standard commissions on mutual funds are $19.95. However, with more than 2,000 mutual funds with no transaction fees, you won’t have a hard time finding a few that appeal to you.
Standard mutual fund prices: $0 for no-transaction fee funds; otherwise, $19.95 for online purchases and sales; $29.95 for representative-assisted transactions.
Mutual Fund Highlights: Over 2,400 mutual funds with no sales or transaction fees.
Schwab Smart Portfolios
Don’t confuse Schwab’s retail brokerage service with its personalized advisory service, which is called Schwab Intelligent Portfolios. In both cases, however, Schwab brings its investor-friendly philosophy to the table. The great thing about this robo-advisor is that it charges no management fees to build and manage your portfolio. So how does it make money? By investing your funds in its own funds, which are nevertheless among the cheapest on the market.
You must have at least $5,000 in your account to take advantage of Schwab’s automated investment service. If you want unlimited access to human financial advisors, you’ll need to transfer at least $25,000 (or fund your account up to that amount) and pay $30 a month, after a one-time $300 set-up fee. You’ll also benefit from Schwab’s customer support team, available 24 hours a day, every day of the week.
Standard pricing: No management fee
Vanguard is the granddaddy of retirement investing, leading the way for all low-cost investors. Vanguard not only charges $0 for stock and ETF trades, but the entire Vanguard family of mutual funds is free (and free even if you need broker assistance to complete a trade), while the company also reduces trades for other fund companies to $0 if they are on the no-transaction-fee list. Otherwise, commissions are $8 to $20 per trade, but clients who hold more than $1 million in Vanguard funds will receive their first 25 trades free.
If you are a long-term buy-and-hold investor, Vanguard is a great vehicle for you because you know they will always look to serve their clients.
Standard mutual fund pricing: Free for Vanguard family funds and other funds with no transaction fees; $8-$20 for others.
Mutual Fund Strengths: Highly regarded for their low-cost index funds, they offer more than 3,000 no-transaction fee funds.
What to consider when choosing a broker
If you’re considering rolling over your 401(k) into an IRA, you’ll probably be most interested in a broker who can do the following best. Most brokers offer an IRA, but some popular brokers do not. The brokers below all offer IRAs. We also considered the following factors when selecting the best places to transfer your 401(k).
Price: Trading commissions for stocks and ETFs have dropped to $0 at most online brokers, and that’s a good thing for investors. But there are other costs as well, including account fees, such as transfer fees from your account.
No-transaction-fee mutual funds: The brokers in the list below offer thousands of mutual funds with no transaction fees. If you’re transferring your 401(k) and you like the mutual funds you already have, these brokers may allow you to buy and sell the same fund without fees.
Investment strategy: While a 401(k) may limit your investment options to a pre-selected group of mutual funds, an IRA gives you the ability to invest in almost anything that trades in the market. So we looked at how each brokerage could meet an investor’s needs.
What are your choices for a transfer?
Generally, when you leave your job, you have three options for managing your employer-sponsored retirement plan:
Leave it in your former employer’s 401(k) plan: This approach requires the least amount of work, but may require you to have a minimum amount (often $5,000) if you plan to keep the account there.
Transfer it to your new employer’s 401(k): This approach will require you to complete some paperwork, but you’ll have all the money in your 401(k) plan in one place. This may be a good choice if you like your new employer’s plan.
Transfer the money to an IRA: This will require you to fill out some paperwork, but then you’ll have complete freedom to invest the money as you see fit. If you liked the investment options (like mutual funds) you held in a previous plan, you may still be able to access them through an IRA.
(If you run an independent business and have established a solo 401(k) plan, that’s another option for a rollover. But this option is not typical for most individuals.)
If you’re rolling over your 401(k) into an IRA, you’ll also need to consider the type of rollover you need.
With a Roth 401(k), you’ll probably be more interested in a Roth IRA, so you can keep the substantial benefits of that plan.
If you have a traditional 401(k), you’ll probably opt for a traditional IRA.