With the U.S. currently in the year of Peak 65, when more people than ever will reach the traditional retirement age, the already robust amount of rollovers going into individual retirement accounts is likely to increase in coming years, according to some experts.

With retirement plan advisers and wealth managers combining forces, this may mean a chance for rollover capture and management—but those same experts note that the picture is more nuanced. While IRAs are by far the most popular plan rollout option, workplace retirement plans have also become more viable options to keep savings in, and financial advisers are more open to managing them as part of a holistic portfolio of assets.

Assets in IRAs sat at $12.6 trillion as of the end of 2020, slightly greater than the total assets in both defined contribution and defined benefit plans combined, $12.1 trillion, according to the most recent data from the board of governors of the Federal Reserve System, as analyzed by the Employee Benefit Resource Institute.

That growth in IRAs is “likely to continue, because many people cycle through different jobs over a career and may have multiple accounts at different employer plans,” says John Scott, the director of the Pew Charitable Trust’s retirement savings project. “Rollovers provide an opportunity to consolidate accounts, which is desired by participants, and Pew’s survey work has shown that people appreciate having control over their assets in an account that is not part of a former employer.”

About 75% of investments into IRAs come from qualified plan rollovers, according to analysis by the Investment Company Institute. When asked to cite reasons for IRA rollovers, respondents in ICI research given multiple choices cite job changes at 68%, retirement at 43% and other reasons at just 7%.

With more people retiring in the U.S., this would appear to indicate more IRA rollovers. But Scott notes a more complicated picture, as federal legislation has encouraged qualified plan development.

“Recent federal legislation is facilitating an infrastructure that will allow accounts (at least initially small accounts) to follow workers as they move from job to job,” he says. That may lead to employees consolidating accounts that will eventually go into an IRA, but it will take time and analysis to see how that plays out, according to the researcher.

To Stay or Go

Traci Stahl, chief operating officer for Charles Schwab Corp.’s workplace financial services, expects to see IRA roll-ins increase as people hit “distributable events” in their careers—but she, too, notes the potential for many people to stay in workplace plans even after considering their rollout options.

Schwab’s most recent data from its 401(k) business shows that 62% of people making workplace plan withdrawals from a distributable event are moving the funds into an IRA. But Schwab has also found that about 31% of participants who have had a “distributable event,” such as a job change or retirement, still have funds in their workplace plan. Some of those people may still be weighing options, Stahl notes, but some are staying intentionally.

“The differences [between a workplace plan and IRA] in today’s world are rather minimal,” she says. “There may be a pro for them or a con for them based on their individual situation, [such as] … What are the fund selections in their current retirement plan versus ones they will get in an IRA? They’ll also be thinking what kind of access they’re going to have to tools, resources, professional advice—is that more appropriate in an IRA that they may transition to, or are they getting what they need in the plan today?”

The decision to move into an IRA may also not happen immediately. Stahl says that people take an average of 2.5 years to decide to move retirement savings.

From Work to Wealth

A shift to more people staying within plan may mean less fee generation across retirement plans and wealth management. But Peter Campagna, a principal in the Wise Rhino Group of consultants who specializes in M&A, says there is a misconception that the retirement and wealth convergence is focused on rollovers from retirement plans. The actual focus, he says, is becoming fiduciaries for financial advisement and planning.

“I don’t think anyone that I do business with is really focused on rollovers,” he says. “[Plan advisers] are focused on engaging participants in wellness, overall, and becoming fiduciaries for participants’ overall health; if that includes the rollover, then so be it. But these firms are thinking way bigger than the rollover and want everything around it as well.”

Increased regulation, he notes, is yet another reason to approach rollover business cautiously. That focus may heighten further if the Department of Labor finalizes its recent retirement security proposal, which brings one-time rollover advice under the Employee Retirement Income Security Act.

Edward Gottfried, senior director of product at Betterment, notes that financial advisers today will often manage a client’s portfolio and a 401(k) plan via account linking.

“The adviser can take [the 401(k)] into consideration when thinking about your asset allocation, and they often want to give advice on how you want to continue participating in that 401(k) plan and at what rate, as opposed to different accounts available to you,” Gottfried says. “That introduces the opportunity for advisers to facilitate the conversation of how and when to think about where those assets are custodied and start to give more detailed recommendations.”

He notes that there is significant individual choice at play in terms of how much control someone may want over their savings, as opposed to those who are happy with their 401(k) setup.

“There are fiduciary rules and responsibilities that must be present in a 401(k) that won’t apply in all situations in an IRA,” he says. “That may mean that investment options that may excite you as an individual may not be available to you, whether that is something that is more conservative or more aggressive.”

Cash flow is also another key differentiator, Gottfried notes, with people wanting to access their savings more easily for projects or large purchases. In this case, IRAs may have advantages that workplace plans do not offer.

End Game

When it comes to figuring out how to manage assets in retirement, Schwab’s Stahl notes, the conversation generally gets more complicated. In today’s economy, many retirees may be factoring in circumstances such as remaining with a firm part-time, getting income from a different part-time role, retiring altogether and how might they want to be spending their savings.

“That may lead to portions of it going to an IRA or portions of it still staying in the plan if those are some of the choices they have within their 401(k) plan,” she says.

Stahl says that the financial adviser’s role, whether via the workplace plan or outside of it, is to be transparent and to guide people to their best option.

“When we’re having these conversations with helping people through some of these consideration points, it’s being as transparent as possible and thinking through all the different things they might need at that particular event,” she says. “It will be different for different people, and it may just take some time for them to think through what is right for them, depending on their situation.”