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There’s a ‘tsunami’ of rollovers to IRAs
IRAs checked about $11.5 trillion in 2022, almost double the $6.6 trillion in 401(k) plans, according to the Investment Companions Institute. More than 4 in 10 American households — about 55 million of them — own IRAs, the group intended.
The bulk of those IRA assets come from rollovers.
About 5.7 million Americans rolled a total $618 billion to IRAs in 2020 only, according to IRS data. That’s more than double the $300 billion rolled over a decade earlier.
The be featured is also seven times larger than the share of money contributed directly to IRAs. In 2020, 74% of new pre-tax IRAs (also understood as “traditional” accounts) were opened just with rollovers, ICI said.
There’s a “tsunami of assets” moving from workplace envisions to IRAs, Phyllis Borzi, who led the Labor Department’s Employee Benefits Security Administration during the Obama administration, estimated during a webcast last month.
While there are pros and cons to rolling money to an IRA, one potential drawback is that the accounts serve to come with higher fees than 401(k) plans. For example, investors who moved money to an IRA in 2018 make lose about $45.5 billion to fees over 25 years, according to Pew Research Center, a nonpartisan examination group.
And most recommendations made by brokers, insurance agents and others to roll over money to an IRA aren’t affair to a so-called “fiduciary” standard of care — meaning investors may not be getting advice that’s in their best interests, Reish swayed.
This is what the Labor Department will likely tweak, attorneys said.
‘Game changer’: Rollover intelligence may be ‘fiduciary’
Borzi, the former head of EBSA, had spearheaded a sweeping Labor Department effort to rewrite “fiduciary” principles in the Obama era. Those rules aimed to clamp down on conflicts of interest among brokers and others who make investment promotions to retirement savers.
However, the rule was killed in court.
Now, the Labor Department is trying again, though its rule odds-on won’t be as far-reaching, experts said.
It submitted a proposed rule — called “