Concept · Account placement
What is an IRA rollover, and what goes wrong with it?
Direct answer Moving a workplace 401(k) balance into an IRA, usually after a job change. The plan's default fund does not come along: the money arrives as cash in an account with no default investment. In Vanguard's data, 28% of one year's rollovers were still in cash seven years later.
The cost of idle rollover cash is the whole return it would have earned, for as long as it sits. Read the rollover that never got invested.
Sources
- Vanguard's rollover-to-cash finding, as reported by CBS Newscbsnews.comRefetch the primary Vanguard paper before publishing.
- ICI, retirement market data (IRAs $19.2 trillion)ici.org
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