The Consequences of 401k Rollovers

Many individuals unintentionally harm their retirement savings through improper management of 401k rollovers. In 2022, a significant $770 billion was transitioned from 401ks to IRAs, yet a concerning statistic emerged from Vanguard indicating that nearly one-third of those who rolled over their 401ks to IRAs left their funds sitting in cash for years. This neglect has often resulted in these savings not earning adequate returns, as many brokerage accounts do not place these funds in high-yield accounts. The steep financial implications of this inaction became vivid when it was pointed out that a $10,000 investment left idle in cash would maintain its value over seven years, while the same amount invested wisely could have grown to around $26,000 during the same period.