Should Retirees Rollover Their 401k or 403b into an IRA?

If you're retired and still have money in a former employer’s 401(k), you may be wondering: Should I roll it over into an IRA? The answer for many retirees is yes — and in this post, I’ll walk you through four important reasons why a rollover might make sense for you, along with some key caveats and considerations to keep in mind.

1. Expanded Investment Choices

One of the most compelling reasons to consider rolling over your 401(k) into an IRA is the broader range of investment options. 401(k) & 403(b) plans typically offer a curated list of funds selected by the plan administrator — and sometimes that list is very limited. We’ve seen plans without even a basic index fund in certain asset classes.By contrast, an IRA opens the door to a much larger universe of investments, including:

• Low-cost ETFs 
• Mutual funds 
• Individual stocks and bonds 
• Alternative investments

This expanded menu allows you to tailor your portfolio more precisely to your personal risk tolerance, financial goals, and retirement income needs — often at a lower cost and with greater diversification.

2. IRAs Offer Greater Control Over Dividends & Interest

Here’s a lesser-known advantage of an IRA: control over how interest and dividends are handled. In a 401(k), any interest or dividends are automatically reinvested. While that’s great during your accumulation years, it can be inefficient in retirement when you may prefer to receive that income in cash. With an IRA, you decide — reinvest or receive those earnings as cash. For retirees using their portfolio for income, this can reduce the need to sell investments to meet monthly or quarterly withdrawals.

3. More Flexibility with Distributions

Distribution rules inside 401(k) plans can be restrictive. Some plans only allow withdrawals that sell all funds proportionally (pro rata), while others use a fund hierarchy that decides which investments are sold first. This can make income planning confusing — and potentially tax-inefficient. IRAs offer full control over withdrawals:

•  You choose which investments to sell.
•  You decide when and how much to withdraw.

This flexibility can make managing cash flow and taxes in retirement much easier.

4. Simplified Account Management (and Lower Fees)

Consolidating your retirement assets into a single IRA can streamline your entire financial life. Benefits include:

• Easier rebalancing 
• Simpler setup of automatic withdrawals 
• Unified management of Required Minimum Distributions (RMDs) 
• Cleaner tax reporting and fewer documents at tax time

Additionally, some 401(k) plans charge distribution fees — something you typically won’t encounter with IRAs.

A Word of Caution: If You Aren't Retired Beware of In-Service Distributions

One important note: these rollover benefits apply to retirees. If you're still working and your advisor recommends an in-service distribution — moving funds from your 401(k) to an IRA while still employed — be cautious.This is rarely in a client’s best interest. We’ve covered that topic in more detail in a separate post and video:

Don’t Overlook 401(k) Fees

Before making any changes, review the fees in your 401(k): Plan administration fees (for recordkeeping and custodial services) are often paid by your employer — but not always. Your Summary Plan Description will clarify this.Investment fees can vary. Some 401(k) funds are cheaper than IRA alternatives, but that’s not a universal truth. It depends on your specific plan.

So, should you roll over your 401(k) into an IRA in retirement? For many retirees, the answer is yes — because of:

✅ Expanded investment choices

✅ Greater control over income and withdrawals

✅ Potential for lower fees

✅ Simplified account and tax management

At Ark Royal Wealth Management, we help retirees evaluate these decisions carefully to make sure their rollover — if appropriate — aligns with their broader retirement goals.

Have questions about your 401(k) rollover options or whether an IRA is right for you? We’re happy to help. Schedule a consultation or contact our team to get personalized advice.