Should You Pay 0.83% AUM to Move a $1.4M 401(k) to an IRA?

Decision overview

Retirement is imminent and you hold $1.4 million in a workplace 401(k) at Fidelity. You are considering rolling the 401(k) into an IRA and hiring a Fidelity adviser to manage the account for a 0.83% assets-under-management (AUM) fee. This brief evaluates the costs, benefits, and decision framework to determine whether that fee is reasonable for your situation.

Quick, quotable conclusion

A 0.83% AUM fee on $1.4 million equals $11,620 per year; that cost is justifiable only if the adviser delivers clear value beyond do-it-yourself alternatives, including personalized tax, distribution and risk-management strategies that materially affect long-term net returns.

How to quantify the fee

• Raw fee: 0.83% × $1,400,000 = $11,620 annually.
• Net-return sensitivity: a static reduction of 0.83 percentage points off gross portfolio return compounds over time; even a 0.5% difference in net return can change portfolio longevity and withdrawal sustainability.

These are straightforward arithmetic outcomes you can use in a cost-benefit comparison against alternatives (self-managing, low-cost robo/advisor, or a different human adviser).

Pros of hiring the firm’s adviser during or after a rollover to an IRA

• Convenience and delegation: If you are not comfortable managing investments, a qualified adviser reduces behavioral risk (panic selling, poor timing) and execution burden.
• Integrated services: An adviser can coordinate asset allocation, withdrawal sequencing, Social Security claiming strategy, and beneficiary planning within the IRA framework.
• Fiduciary or advisory standard: Confirm whether the adviser is acting as a fiduciary for fee-based clients; fiduciary duty can reduce the risk of unsuitable product recommendations.

Cons and friction points to evaluate

• Fee drag: $11,620 per year is a recurring drag. Over a 20-year retirement horizon, fees compound and materially lower distributions if not offset by adviser alpha.
• Potential conflicts of interest: Firm-affiliated advisers may recommend proprietary funds or products that generate revenue for the firm. Ask whether the recommended investments include revenue-sharing or transaction-based costs.
• Loss of low-cost options: Some workplace 401(k) plans provide institutional share classes and low-fee funds that may not be available or as inexpensive inside an IRA managed by the firm.

Key due-diligence questions to ask the adviser (and document answers)

• Fee breakdown: Is 0.83% all-in for investment management, or are there fund expense ratios, transaction costs, or platform fees in addition?
• Fiduciary status: Will you receive a written fiduciary acknowledgment specifying the standard of care?
• Performance targets: What net-of-fee performance or risk reduction objectives does the adviser target for a similarly sized account?
• Service scope: Does the adviser provide retirement distribution modeling, tax-loss harvesting, coordinated tax planning, or cashflow modeling for required minimum distributions (RMDs)?
• Conflicts and compensation: Does the adviser receive commissions, or is compensation strictly fee-based?

Comparison framework: what the fee must deliver

For a 0.83% AUM fee to be justified, the adviser should deliver at least one or more of the following measurable benefits:

• Net return improvement that exceeds the fee (after costs and taxes), or
• Behavioral value via disciplined, tax-efficient distributions that materially improve retirement income sustainability, or
• Access to institutional-priced investments or planning services you cannot replicate at a lower cost.

If none of these apply, aggressively negotiate the fee or consider alternative solutions.

Implementation considerations for rolling a 401(k) into an IRA (ticker context: IRA)

• Investment menu: An IRA typically offers a wider range of investments but may lose institutional share-class pricing from the 401(k).
• Account protections: Understand creditor protections and plan-specific rules that differ between 401(k) and IRA structures.
• Beneficiary and estate considerations: Confirm how beneficiary designations transfer and whether the adviser will help implement stretch/legacy strategies where applicable.

Alternatives to paying 0.83% AUM

• Self-manage with a disciplined plan using low-cost ETFs and mutual funds.
• Use a robo-advisor or low-cost registered investment adviser with flat or lower AUM fees.
• Retain the 401(k) at Fidelity if it provides strong low-cost options and plan services.

Each alternative has trade-offs in service, customization, and behavioral guidance.

Red flags and negotiation tactics

• Red flag: Unclear fee aggregation or variable fee layers. Get a written fee schedule.
• Red flag: Required rollovers to proprietary funds with higher expense ratios.
• Negotiation: Ask for a tiered fee, performance-based fee components, or to exclude cash/short-term holdings from AUM calculation.

Practical next steps

1. Ask the adviser for a disclosure packet and a written scope-of-services document that specifies fiduciary status, all fees and expenses, and service deliverables.

2. Run the fee math against plausible net-return scenarios (for example, model a 0.5% net return differential) to see the impact on portfolio longevity and withdrawals.

3. Compare service levels and fees from at least two independent RIAs or discretionary managers and one low-cost option.

4. If you keep the adviser, negotiate performance metrics, a trial period, or reduced fees for the first year.

Final assessment

A 0.83% AUM fee on $1.4 million equals $11,620 per year. That cost can be reasonable if the adviser provides demonstrable, repeatable value in tax-efficient distributions, risk management and behavioral coaching that improves net retirement outcomes. If the adviser cannot document specific, measurable benefits or if cheaper viable options exist, do not assume the fee is fair by default. Use the due-diligence checklist above, quantify the fee’s long-term impact on withdrawals, and negotiate terms before rolling the 401(k) to an IRA.