A year after retiring, more than half (55%) of workers have left their 401(k) balance in their former employer’s plan — up from 45% four years ago. That’s according to Fidelity’s data pertaining to the plans it manages.

Why are people leaving their money in their employer’s plan after retiring? Fidelity’s Dave Gray, head of workplace retirement offerings and platforms, thinks many such investors may be motivated by their plan’s low fees or simply want to stay with the same administrator. Of course, it also could be attributed to lethargy, the same reason why so many people who were automatically enrolled in their workplace plan never get around to increasing the typically low default contribution rate.

Is it a good idea to keep retirement assets in a former employer’s workplace plan? It depends. If you've simply been using index funds and are content to continue doing so, there may be no need to make a change. (But see Don't Be Surprised if Target-Date Funds Miss the Mark.)  

If you’re worried about being sued, that, too, would point you toward keeping your money in a 401(k). Workplace plans offer more protection than IRAs. In short, 401(k) balances cannot be included in any lawsuits, whereas IRAs don’t offer that same level of protection. For people in professions with a higher-than-normal chance of lawsuits, such as physicians, protecting retirement savings from creditors may be an important consideration.

However, for SMI members, or those who would like to become members, transferring 401(k) plan money to an IRA would make a lot of sense. By “rolling over” the money into an IRA, an investor typically gains access to a much wider array of investment choices. (A “rollover” is the legal term in the tax code that refers to a tax-free transfer of cash or other assets from one retirement program to another.) Even workplace plans that provide access to a so-called “brokerage window” typically do not make exchange-traded funds (ETFs) available. Access to a wide array of traditional mutual funds and ETFs provides the freedom needed to execute any SMI strategy.

Bottom line? Unless you have reason to be concerned about lawsuits, we believe it’s best to transfer 401(k) plan assets to an IRA upon retirement where you’ll enjoy access to more investment choices.