Have you changed jobs and left your old 401(k) with your previous employer? Have you opened IRAs each year at a different bank shopping around for better IRA CD rates?
No matter how you got them, you may find yourself with a collection of IRAs or other retirement accounts scattered around. What’s worse is that you probably have no overall investment strategy for these accounts because they are not connected to each other.
You can simplify your finances and cut down on the record keeping if you consolidate all of your IRAs into a single account. Consolidation can include that old 401(k), which you can probably rollover to an IRA, by placing a short phone call to the investment provider or by completing a form.
The benefits of consolidating your IRAs include:
- Reduced Expenses. Many IRAs charge annual custodial fees. Consolidating your IRAs will reduce the number of these fees you may be paying.
- Less Record Keeping. You will get fewer monthly statements, fewer emails, and not as many forms at tax time.
- Coordinated Investments. Having a well-diversified portfolio is much more difficult when you have several IRA accounts held in different places.
- Easier RMD Calculation. Did you know you will reach a point in retirement when you will be required to take money from each retirement account? At age 70.5 when Required Minimum Distributions (RMDs) start, you’ll have multiple IRA custodians contacting you each year to process the distributions. If the IRAs are consolidated, it’s just one calculation. Also, if you need to figure out how much income tax to withhold, the amount is based on just one account balance.
- Simpler Estate Administration. More accounts equal more work and more complexity! Consolidating your accounts now will make estate administration simpler for your kids and/or your executor.
Make a plan to get those IRAs working together!