5 Reasons You Should Consolidate Retirement Accounts

5 Reasons You Should Consolidate Your Retirement Accounts

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:

  1. Reduced Expenses. Many IRAs charge annual custodial fees. Consol­i­dating your IRAs will reduce the number of these fees you may be paying.
  2. Less Record Keeping. You will get fewer monthly state­ments, fewer emails, and not as many forms at tax time.
  3. Coordi­nated Invest­ments. Having a well-diversified portfolio is much more difficult when you have several IRA accounts held in different places.
  4. 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.
  5. 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!