401(k) to IRA Rollover Calculators: A Tax-Drag Comparison

The decision, briefly

You leave a job. You have a 401(k) at the former employer. You have three options:

1. Leave the money in the old 401(k).
2. Roll it into your new employer's 401(k) (if they accept rollovers).
3. Roll it into a Traditional IRA.
4. Cash it out (almost always wrong; we'll skip this).

The default advice from most consumer-finance tools: roll to an IRA. Better fund selection, lower fees, more flexibility. That advice is correct for many users. It's wrong, occasionally, for important reasons.

What we tested

Four calculators that frame the rollover decision: Empower (account-linked), Boldin PlannerPlus, Vanguard's rollover comparison tool, Schwab's rollover decision support.

Test scenario: $385,000 in an old 401(k) at a former employer. Plan options were narrow and expense-laden — average fund expense ratio of 0.65% across the available choices. The user is 38 years old, currently in the 24% federal bracket but expects to enter the 32% bracket within five years.

The fee math

If the user rolls to a Vanguard IRA and holds equivalent total-market index funds at 0.04% expense ratio, the fee savings are 0.61% annually on $385,000 = $2,348/year initially, growing as the balance grows.

Over 30 years at 7% real return, the cumulative fee savings work out to approximately $108,000 in present-value terms, or roughly $31,400 in compounded difference accounting for the lost fee being reinvested.

This is the headline number most rollover calculators surface. It is real and it is large.

The tax-strategy cost

The user expects to enter the 32% federal bracket within five years. At that income level, the user becomes ineligible for direct Roth IRA contributions. The standard high-earner workaround is the backdoor Roth strategy.

Backdoor Roth requires that the user's traditional IRA balance be zero (or near it) on December 31 of the conversion year. If the rollover happens, the IRA balance becomes $385,000+, and the pro-rata rule turns any backdoor Roth conversion into a 99%+-taxable event.

For a high earner contributing the maximum $7,000 annually to a backdoor Roth, the pro-rata-tainting effectively foreclosees the strategy. Lifetime cost: $7,000/year × 25 years × 32% = $56,000 in unrealized tax-free growth, plus the contribution itself becomes inefficient.

Net: the rollover's $31,400 fee savings is offset (and then some) by the foreclosure of backdoor Roth.

The fix: roll into the new employer's 401(k) instead. The IRA balance stays zero; backdoor Roth remains available.

ERISA protection

401(k) plans carry ERISA-level creditor protection that's structurally stronger than IRA protection. ERISA-qualified accounts are protected from creditors in nearly all circumstances. IRAs receive bankruptcy protection (up to $1.5M in 2025, indexed) but more limited protection from non-bankruptcy creditor actions, with state-by-state variation.

For most users this is theoretical. For physicians, attorneys, business owners, and others with elevated personal-liability exposure, the ERISA protection is worth maintaining. None of the calculators we tested surface this.

NUA: the trap and the opportunity

If the 401(k) holds employer stock and the stock has substantially appreciated, Net Unrealized Appreciation (NUA) treatment can produce major tax benefits — but only if executed correctly during a qualifying lump-sum distribution, and only if the stock is moved to a taxable brokerage account rather than rolled to an IRA.

For a worker holding $200,000 in company stock with $50,000 cost basis, NUA treatment could mean paying ordinary income tax on the $50,000 basis at the time of distribution but deferring the $150,000 of appreciation to long-term capital gains rates when eventually sold. Versus rolling everything to an IRA where future withdrawals are 100% ordinary income.

The tax savings can be substantial. None of the rollover calculators we tested ask whether company stock is in the 401(k); none mention NUA.

For users without company stock, this is irrelevant. For users with significant company stock holdings, it's potentially the most important variable in the rollover decision.

What the calculators get right

Empower's tool integrates real fee data from linked 401(k) accounts, so the comparison to a Vanguard IRA is grounded in actual numbers rather than hypotheticals. The fee-savings calculation is rigorous.

Boldin handles the backdoor Roth pro-rata interaction correctly and surfaces it as a planning consideration. None of the other tools we tested do this.

Vanguard's tool surfaces fund-expense differences clearly, which is helpful for users whose primary motivation for rolling is access to cheaper funds.

What the calculators consistently miss

ERISA protection. None mention it.

NUA opportunity for company stock. None ask about it.

Future earnings trajectory. The decision to roll or not is sensitive to whether the user's income will grow into the high-earner brackets where backdoor Roth becomes valuable. Most calculators don't ask about expected income growth.

Loan accessibility. 401(k) plans typically allow loans against the balance; IRAs don't. For some users (rarely retirement-optimal but sometimes practical), this is a real consideration.

A simple framework

The decision tree most rollover calculators should produce but don't:

1. Do you hold company stock with significant appreciation? → Consider NUA before any rollover decision.
2. Do you expect to be a high earner who'll need backdoor Roth? → Roll to your new employer's 401(k), not an IRA.
3. Do you have elevated personal-liability exposure? → Stay in 401(k) where possible.
4. Are the old 401(k) plan's fees egregious AND none of the above apply? → Roll to IRA.

This is the framework. None of the consumer calculators produce it. Most produce only the fee comparison, which is the easy part of the question.

The verdict

The 401(k)-to-IRA rollover decision is more nuanced than fee savings alone. Most consumer calculators correctly compute the fee savings and ignore the strategy and protection costs.

For a meaningful subset of users (high earners, those with company stock, those with elevated liability exposure), rolling to an IRA is the wrong default. Use Boldin's tool for the strategic interactions. Talk to a CPA before any rollover that involves company stock or backdoor Roth implications. Don't trust calculators that frame the decision as a fee question alone.

The math doesn't lie. The framing of which math to do, sometimes does.