Investors roll more than $600 billion a year to IRAs. Anticipated Labor Department rules could raise their protections

cnbc.com:

The U.S. Department of Labor is poised to issue a rule in coming weeks that's likely to raise protections for investors who roll money from a 401(k) plan into an individual retirement account, according to attorneys who specialize in retirement law.

The stakes are high: Millions of people roll their nest egg from workplace retirement plans into IRAs every year. It's a common move when workers switch jobs or retire.

But current rules can expose them to poor investment advice from brokers, insurance agents and others in the financial ecosystem — which can have negative outcomes like higher fees that erode their savings, attorneys said.

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«It may not cause fewer rollovers, but it will almost certainly cause more thoughtful rollovers,» Fred Reish, a retirement expert and partner at law firm Faegre Drinker Biddle & Reath, said of his expectation for the forthcoming rule.

IRAs held about $11.5 trillion in 2022, almost double the $6.6 trillion in 401(k) plans, according to the Investment Company Institute. More than 4 in 10 American households — about 55 million of them — own IRAs, the group said.

The bulk of those IRA assets come from rollovers.

About 5.7 million Americans rolled a total $618 billion to IRAs in 2020 alone, according to IRS data. That's more than double the $300 billion rolled over a decade earlier.

The figure is also seven times larger than the share of money contributed directly to IRAs. In 2020, 74% of new pre-tax IRAs (also known as «traditional» accounts) were opened just with rollovers, ICI said.

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