Rolling over a $1 million 401(k) to a financial advisor might seem like a smart move — but according to personal finance expert Suze Orman, there are some serious trade-offs to consider first.
In a recent episode of the “Women & Money” podcast, Orman shared her thoughts on a listener’s situation and pointed out why early retirees should think twice before making the switch.
The question came from Jeff, whose husband retired early at age 57. The couple has over $1 million saved in a 401(k), split between traditional and Roth accounts. Their financial advisor, who works with Morgan Stanley (NYSE:MS), has suggested rolling both accounts into IRAs under his management.
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While Jeff said the advisor has been helpful with other investments, he’s concerned about fees and whether moving the entire 401(k) is truly in their best interest.
Orman’s main concern? Early access. She explained that because Jeff’s husband retired at 57, he qualifies under IRS Rule 72(t), which allows penalty-free withdrawals from a 401(k) if someone leaves their job in the year they turn 55 or later. That flexibility would disappear with a rollover.
“If you roll it over to your financial adviser,” Orman said, “you cannot touch that money until you are 59½ years of age.”
So while taxes would still apply to withdrawals from the traditional portion, the penalty-free access could be a crucial safety net — especially in uncertain times.
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Orman also raised a flag about the Roth portion. If Jeff doesn’t already have a Roth IRA with the advisor, the rollover could restart the five-year waiting period before earnings can be withdrawn tax-free.
That means even Roth funds could be locked up longer than expected, depending on how the rollover is done.
“You don’t have to be an all-or-nothing investor,” Orman pointed out. Instead of rolling over everything, Jeff could consider leaving part of the 401(k) — especially the traditional part — where it is. That way, early access remains available if needed.
