Five Reasons Why You Need to Consolidate Your IRAs - Rodgers & Associates

Five Reasons Why You Need to Consolidate Your IRAs

If you have ever shopped around for bank CD rates, you may have found yourself opening an IRA each year at a different bank. Or perhaps you found a great new job and left your 401k with your previous employer. Maybe you even started a new IRA when you changed financial advisors and haven’t touched your old IRA since.

No matter how you got them, you may find yourself with a collection of IRAs scattered around. What’s worse is that they probably have no overall strategy and are not connected to each other.

Did you know you will reach a point in retirement when you will be required to take money from each of them?

There is a way to simplify that process and cut down on the record keeping. You should consol­idate all of your IRAs into a single account. This includes that old 401(k) which you can probably rollover to an IRA with a 5‑minute phone call to the investment provider and by completing a form.

The benefits of consol­i­dating your IRAs include:

  1. Less Record Keeping – You will get fewer monthly state­ments, fewer emails and not as many forms at tax time.
  2. Coordi­nated Invest­ments – Making sure you have a well-diversified portfolio can’t be done when you have several IRA accounts held in different places.
  3. Reduce Expenses – Many IRAs charge annual fees. Consol­i­dating the IRAs will reduce the amount of fees you are paying.
  4. Simpler Estate Admin­is­tration – If you have ever settled someone’s estate, you know all about this. More accounts equal more work and more complexity! Make it easy on your kids and/or your executor.
  5. Easy Required Minimum Distri­b­u­tions (RMDs) – At age 70.5 when RMDs start, you’ll have multiple IRA custo­dians after you each year. If the IRAs are consol­i­dated, it’s just one calcu­lation. Also, if you need to figure income tax withholding, the amounts are based on just one account.

Just as important as any other spring cleaning, clean up your finances this year! Make a plan to get those IRAs in one place.