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Subject:  Re: 401k distribution fee Date:  2/26/2021  5:55 PM
Author:  aj485 Number:  101498 of 102724

With more brokers offering cheaper (free) and easier (fractional) trades, more investors are moving funds post-employment from a 401k to a DIY IRA. So it should not be surprising that 401k plans take steps to discourage that action.

Those fees were in place long before cheaper (free) and easier (fractional) trades were available at brokerages. I paid a fee for moving my Fidelity administered 401(k) to an IRA in 1996. Fidelity did offer to waive the fee if I had kept the IRA at Fidelity, but I wanted to buy Vanguard funds, not Fidelity funds, and buying Vanguard funds at Fidelity would have cost many times more in commissions than the one-time fee to move the 401(k).

I would agree that it's not surprising that 401(k) plans impose fees to discourage moving assets. But those fees have been in place a lot longer than widespread free trades and fractional shares have been, so I don't think those features are the motivation.

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