Suze Orman: Why You Should Transfer Your 401(k) Or 403(b) Into A Roth IRA When You Leave A Job

When you leave a job, what happens to your retirement savings? If you have a 401(k) or 403(b), personal finance expert Suze Orman says it might be time to consider a rollover — especially into an IRA or Roth IRA. On a recent episode of her "Women & Money" podcast, Orman explained why she's been recommending this move for years.

Here's what you need to know about her advice and why it could benefit your long-term retirement plans.

More Investment Choices After a Rollover

Orman's number one reason for rolling your 401(k) or 403(b) into an IRA? Flexibility.

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Retirement plans through your employer usually limit you to a small number of mutual funds or company-selected investment options. But once you roll over your savings into an IRA or Roth IRA — especially through a brokerage firm like Fidelity or Schwab — you get access to a much wider variety of investments.

"When you transfer it and put it into an IRA, now you can buy exchange-traded funds, individual stocks. You could buy certificates of deposit. You could buy treasuries," Orman said. "You could probably even buy the exact same things the 401(k) is invested in."

She also pointed out that if you're looking to hold individual bonds, you won't be able to do that within most workplace plans. Instead, you're usually stuck with bond funds — something she personally doesn't recommend.

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The Tax Advantage of a Roth IRA Conversion

Depending on the type of plan you have — traditional or Roth — how you roll over your funds matters. A traditional 401(k) or 403(b) must be rolled into a traditional IRA to avoid taxes on the full amount at the time of transfer. A Roth 401(k), on the other hand, can move into a Roth IRA.

Orman encourages listeners to think carefully about converting from a traditional to a Roth IRA during retirement. That's because, in retirement, you're likely in a lower tax bracket than you were during your working years. Paying taxes on the conversion now could mean paying less than you would later when required minimum distributions kick in.

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What If You're Nervous About Managing Your Investments?

Orman acknowledges that not everyone is ready to take control of managing their own investments after a rollover. If you're comfortable with your current plan and the idea of managing a large sum on your own feels overwhelming, it's OK to leave the money where it is.

Transferring your retirement savings into an IRA or Roth IRA after you leave a job isn't just about moving money around — it's about gaining more control, more choices, and the ability to tailor your investments to your changing needs.

Whether you’re approaching retirement or already there, it may be worth exploring if a rollover makes sense for you. A financial advisor can help you weigh the pros and cons based on your situation.

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