Combine and Simplify

Key Takeaway

Maintaining your finances can be time-consuming enough without having to keep track of multiple accounts. You can simplify the task by consolidating assets to make them more manageable.

Unintended Consequences

For most individuals, the proliferation of accounts may be inadvertent. You may have accumulated money in more than one employer-sponsored retirement plan or Individual Retirement Arrangement (IRA) throughout your career. In addition, you may have personal savings and investments in banks, credit unions, and brokerage accounts. Having multiple accounts makes investments harder to monitor. And once you begin taking Required Minimum Distributions (RMDs) from your tax-deferred retirement accounts, having several accounts can complicate matters for you.

Making It Easier

You can consolidate retirement accounts by rolling over balances from former employers’ plans into your current employer’s plan if it accepts rollovers or into an IRA. A trustee-to-trustee transfer avoids taxes and penalties on the funds you roll over.

There may be a variety of options available, depending on your circumstances, when it comes to handling your retirement assets. These options include leaving assets in your former employer’s retirement plan (if allowed), moving the balance to your new/existing employer’s plan (if allowed), rolling the assets into an IRA, or taking a cash distribution/lump sum.

Be sure to consider each option’s potential benefits and limitations regarding handling your assets. You should consider services offered, potential withdrawal penalties, fees and expenses, treatment of employer stock, required minimum distribution planning, the range of available investments, and protection from creditors. Discuss rollover options with your tax advisor for tax considerations.