When rolling over your 401(k) is the wrong move

Your old plan has lower fees

Fees are one of the biggest predictors of how much you’ll earn from your investments.

If your investment choices are limited, the investment company basically has a monopoly when setting its prices, called expense ratios.

In choosing your investments, you’d be wise to pick funds with extremely low expense ratios, like a Vanguard target date fund with a 0.18% expense ratio.

Your 401(k) plan might limit you to funds whose expense ratios are closer to the industry average: a significantly higher 0.99%, according to the Investment Company Institute.

If you have $50,000 in your 401(k), the difference between a 0.18% expense ratio and a 0.99% expense ratio is $405 a year.

Sometimes, however, investing through a 401(k) means your fees are extremely low. Because your employer is funneling so many people to particular investments, those investments charge rock-bottom fees.

If you’re paying low fees through your former employer’s 401(k), that’s a compelling argument for staying invested in that plan. Beware, though, 401(k) plans sometimes charge higher fees to former employees.