If you have a 401(k) account and recently left your job, you might be wondering what to do with your retirement investments. Even if you’ve left your employer some time ago, you have several options when it comes to finding the best place to roll over your 401(k).
In general, you have three choices once you leave a job:
- Leave it with your old 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 maintain the account.
- Roll it over into your new employer’s 401(k) plan: This approach will require you to file some paperwork, but you’ll have all your 401(k) money in one place. This choice can make sense if you like your new employer’s plan.
- Roll it over into an IRA: This move will require you to file some paperwork, but then you’ll have the complete freedom to invest the money as you see fit. If you liked the investment options (such as mutual funds) you held in a previous plan, you may still be able to access those via an IRA.
(If you run an independent business and have established a solo 401(k), that’s another option for a rollover. But this option is not typical for most individuals.)
If you roll over your 401(k) into an IRA, you’ll also want to consider the kind of rollover you need. With a Roth 401(k), you’ll likely be more interested in a Roth IRA, so that you can maintain the substantial advantages of that plan. If you have a traditional 401(k), then you’ll probably opt for a traditional IRA rollover. (Here’s the key differences between the Roth IRA and traditional IRA.)
If you’re moving your money to an IRA, here’s the best place to roll over your 401(k).
Best online brokers for a 401(k) rollover:
What to consider when choosing a broker
If you’re planning to roll over your 401(k) into an IRA, you’ll likely be most concerned with a broker that can do the following things best. Most brokers do offer an IRA, but some popular ones do not, so the brokers below all offer IRAs. We also considered the following factors when selecting the top places for your 401(k) rollover.
- Price: Trading commissions for stocks and ETFs have fallen to $0 at most online brokers, and that’s great for investors. But there are other costs, too, perhaps most notably account fees, such as fees for transferring out of your account.
- No-transaction-fee mutual funds: The brokers in the list below offer thousands of mutual funds without a transaction fee. If you’re rolling over your 401(k) and you like the mutual funds you have already, these brokers may allow you to buy and sell the same one without a fee.
- Investing strategy: While a 401(k) may limit your investing options to a pre-selected group of mutual funds, an IRA gives you the ability to invest in almost anything trading in the market. So we considered how each broker might fit an investor’s needs.
Overview: Top online brokers for a 401(k) rollover in May 2020
TD Ameritrade is a great broker if you’re an active trader and looking for professional-level tools to help you invest better. Investors can use the broker’s highly regarded thinkorswim trading platform and can place trades not only on stocks, bonds and ETFs but also forex and futures, too. That said, TD Ameritrade still works perfectly if you’re a buy-and-hold long-term investor, too. If you need a start with research, you’ll find all kinds of reports on stocks and the markets, and you can review a huge selection of no-transaction-fee mutual funds. TD Ameritrade also offers online stock, ETF, and option trades for zero commission.
(As of November 2019, Charles Schwab has agreed to purchase TD Ameritrade, and plans to integrate the two companies once the deal is finalized.)
Standard pricing for mutual funds: $49.99
Mutual fund highlight: More than 4,100 no-load, no-transaction-fee mutual funds
E-Trade is a great all-around broker, but it stands out best perhaps for its fundamental research, which can be especially valuable for newer investors or those without another source of research. If you need a fully featured mobile app, the broker has you covered with its Power E-Trade platform, though it does all the basics well, too. The broker’s standard pricing for mutual funds is on the low side, and it offers thousands of no-transaction-fee funds, too. Plus, ETFs and stocks can be traded with no commission, as is standard for online brokers.
(As of February 2020, Morgan Stanley has agreed to purchase E-Trade, and plans to operate the broker as a separate unit once the deal is finalized.)
Standard pricing for mutual funds: $19.99 on no-load, transaction-fee funds
Mutual fund highlight: More than 4,600 no-load, no-transaction-fee mutual funds
Fidelity is an exceptional broker in almost every aspect, but it’s excellent for beginners or those who seek top-notch customer service. Fidelity’s representatives are quick to respond to your questions, which is a big advantage for those of us who don’t deal with the investing and retirement landscape every day.
Those looking for more advanced features will find them in the broker’s Active Trading Pro platform. Plus, Fidelity is great for low account fees, and offers free stock and ETF trades too.
Standard pricing for mutual funds: $49.95 on the buy and $0 to sell + free for Fidelity funds
Mutual fund highlight: Offers four zero-fee index funds and more than 3,500 no-transaction-fee mutual funds
Charles Schwab is strong in every category and caters well to customers from novice to expert. If you’re looking to buy the same mutual funds that you owned in your 401(k) or buy some of the cheaper Schwab-brand variants, then the broker will probably deliver with its thousands of no-transaction-fee funds.
The customer service is excellent here as well, and if you’re looking to trade, you’ll probably find something to love on the highly customizable StreetSmart Edge trading platform. And yes, Schwab does offer free stock and ETF trades, too.
Standard pricing for mutual funds: $49.95 when buying funds outside of the Schwab family; otherwise, $0
Mutual fund highlight: More than 4,200 no-load, no-transaction fee mutual funds
Interactive Brokers is a great fit for active and professional traders, but it can work for retirement and beginner investors, too. One of the broker’s top features is the interest it pays on cash balances in your account, which is the highest we’ve seen.
While trades aren’t free unless you use the broker’s IBKR Lite platform, they are still reasonably priced at just a half-cent per share, with a $1 minimum per trade. The broker also offers a competitive price for trading mutual funds, but also offers thousands of no-transaction-fee funds, near the top of the industry.
Standard pricing for mutual funds: 3 percent of trade value or $14.95 (whichever is less), with a $3,000 minimum initial purchase
Mutual fund highlight: More than 4,000 no-load, no-transaction fee mutual funds
Merrill Edge is a solid overall selection, because it offers a full range of brokerage services. However, it makes an especially great selection if you’re already a customer of its parent Bank of America. That’s because you can access all your accounts in one location and have quick transfers between your bank and brokerage accounts. Plus, you can access Merrill’s reps at many Bank of America locations.
Merrill has also dropped commissions for stocks and ETFs to $0, while standard commissions on mutual funds cost $19.95. However, with more than 2,000 no-transaction-fee mutual funds, you won’t have a hard time finding a few that you like.
Standard pricing for mutual funds: $19.95 for online buys and sells; $29.95 for representative-assisted transactions
Mutual fund highlight: More than 2,400 no-load, no-transaction-fee mutual funds
Vanguard is the granddaddy of retirement investing, blazing the trail for low-cost retirement investors everywhere. Vanguard not only charges $0 for stock and ETF trades but the entire Vanguard family of mutual funds is free, while the company discounts trades for other fund companies to $0 as well.
If you’re a buy-and-hold long-term investor, Vanguard is an excellent vehicle for you, because you know it’s always going to look for ways to serve its customers.
Standard pricing for mutual funds: Free for Vanguard family funds; $8-$20 for others
Mutual fund highlight: Highly regarded for its low-cost index funds