Suze Orman warns against rolling over $1M 401(k) to advisor due to potential restrictions

Personal finance expert Suze Orman warns early retirees against rolling over a $1 million 401(k) to a financial advisor. Orman highlighted the potential trade-offs in a recent episode of the “Women & Money” podcast. The listener, Jeff, received advice to move both traditional and Roth accounts to IRAs managed by their financial advisor from Morgan Stanley.

While the advisor has been helpful, concerns arise over fees and loss of flexibility. Orman emphasized the importance of early access to funds through IRS Rule 72(t) for penalty-free withdrawals. Rollover to an advisor could restrict access until age 59½, impacting financial decisions in uncertain times.

Orman also noted the impact on Roth accounts, suggesting a restart of the five-year waiting period for tax-free withdrawals. Jeff could leave part of the 401(k) untouched for early access, rather than a full rollover. Orman advised considering if the advisor’s returns justify higher management fees compared to the 401(k).

A rollover to a traditional IRA may limit future strategies like backdoor Roth conversions, a valuable tax strategy for high earners. Orman highlighted the importance of understanding all implications before making the move, emphasizing the need to weigh options and potential losses in the process.

Read more at Yahoo Finance: Should They Roll Over A $1M 401(k) To Their Financial Advisor? Suze Orman Warns Against Losing Early Withdrawal Access