Take advantage of the exploding $800B IRA rollover market

The amount of money in Americans’ retirement accounts has almost doubled in the past 10 years, and it’s rolling over to individual retirement accounts at the rate of $800 billion annually and growing. This chart shows that the growth in retirement plans has almost doubled in the past 10 years.

Total deposits in retirement accounts grew from $23.9 trillion in 2015 to $45.8 trillion by the end of the second quarter of 2025, the Investment Company Institute reported.

The total amount of retail rollover activity is projected to be $855 billion in 2025 and could reach $1.15 trillion by 2030, according to a LIMRA study. This growth is driven by factors such as increased job turnover, greater participation in employer sponsored plans, and a growing workforce. 

The big question is: Why are so many retirees and preretirees choosing to roll over their plans to IRAs? Here are seven of the top reasons:

1. Consolidating assets. Many who are planning for retirement have their retirement savings in as many as 10 different accounts. When it comes time to calculate their required minimum distributions, it’s easy to make a mistake that could result in a 25% penalty. Consolidating plans can simplify life and reduce the chance that clients fail to take the correct distribution after turning age 73. 

2. Having a wider range of investment choices.  401(k), 403(b), Thrift Saving Plans and other plans offer certain investment choices chosen by the plan administrator or custodian. IRAs can cover the universe of investment choices including real estate, private equity, precious metals, cryptocurrencies and annuities. Company-sponsored plans are typically limited to mutual funds and bonds. 

3. Converting assets into guaranteed income. When retirement time comes, a reduction in income usually comes with it. Many retirees are replacing earned income with guaranteed lifetime income riders that can be added to many fixed indexed annuities. 

4. Reducing fees and loads. Company-sponsored plans usually come in on the high side of management fees. While the participant is still working and making contributions, they are enjoying company matching deposits. One of the biggest attractions of contributing to company plans is the free money the employer contributes. When the employee retires and no longer makes contributions, the company matching contributions are gone forever.

5. Reducing or eliminating risk. When plan participants are young and in their peak earning years, their time horizon is far in the future and their risk tolerance is still on the high side. When the same participant is nearing retirement and the time when they will need their savings to supplement their income, too much risk can derail their retirement goals. 

6. Encountering too many restrictions in 401(k), 403(b), TSP and other plans. Company-sponsored plans are more different than they are similar when it comes to accessing the funds. Some plans make accessing your funds simple while others make it next to impossible. IRAs are under the same set of IRS rules when it’s time to access funds. 

7. Roth conversions. 401(k) plans are permitted to allow in-plan Roth conversions; however, it is an optional feature, and the specific plan must be amended by the employer to offer this provision. Roth conversions have gained increasing attention due to the extension of the Tax Cuts and Jobs Act of 2017 that was made permanent in July 2025 by the One Big Beautiful Bill Act.

We are currently in the fourth-lowest tax brackets in the past 100 years, making now the ideal time to consider converting to the tax-free Roth. 

Insurance companies, independent marketing organizations and advisors are gearing up to capitalize on the conversion opportunities. New conversion software is available that helps agents and advisors explain the advantages of converting in simple terms that resonate with consumers. 

Although the OBBBA has made the current tax brackets permanent, this could all change with a new administration and a new Congress, so now is the ideal time to convert. 

Consider that an IRA rollover is not the best option for everyone. If your prospect is in a company plan and intends to work past age 73, they will not be forced to take distributions as long as they continue to work for the employer that sponsors that plan. They can delay taking required distributions until they retire. This exemption does not include plans from previous employers. 

Know the difference between rollovers

There are two ways to do a rollover:

1. Indirect rollover

2. Direct rollover

Knowing the difference is crucial! Here is a simple example that explains indirect rollovers.

The check is made out to the plan owner. The plan owner cashes the check, then writes their check to the new custodian of their choosing. This can only be done once in a 365-day rolling period, and the rollover money must be sent to the new custodian within a 60-day deadline. 

Here is what could go wrong. Tim Consumer has 2 IRAs — one for $50,000 and one for $250,000. In January, Tim does an indirect rollover with his $50,000 IRA and gets his check to the new custodian inside the 60-day deadline.  All good so far. Tim is pleased with how smoothly the transaction went and decides in March of the same year to roll over his $250,000 IRA the same way. But he just went astray of the IRS regulations. His $250,000 IRA is no longer tax deferred, and Tim will get a tax bill based on the entire $250,000. 

The graphic shows the advantages of doing a direct rollover whenever possible.

Direct rollovers don’t have a 20% mandatory withholding for taxes, and Tim can do as many direct rollovers as he chooses. No taxes are due because Tim never had constructive receipt of the funds. 

There are many advantages of rolling plans to an IRA:

1. Safety of principal with fixed annuities.

2. IRA annuities can generate a guaranteed income for life.

3. Consolidating plans into one IRA can simplify calculating RMDs.

4. Reduce or eliminate fees and loads.

5. Reduce or eliminate market risk.

The good news is the participant doesn’t need to wait until they retire to do a rollover from most company-sponsored plans. Most plans allow for an in-service rollover after the participant turns age 59 ½. An in-service rollover allows the transfer of retirement funds from the current employer’s plan (like a 401(k) or 403(b)) to another eligible retirement account, such as an IRA, while the participant remains employed at the company. This differs from a standard rollover, which typically happens after leaving a job. Confirm with the plan administrator that your client is eligible for an in-service rollover and understands all the rules.

An in-service rollover offers the best of both worlds. The client can protect the proceeds from a market correction and, in most cases, continue to make tax-deductible contributions and continue to receive company matching funds. 

What are your action steps?

Learn everything you can about rollovers, and position yourself and your practice as a rollover expert and get in front of the “money in motion.”