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Should you consolidate your multiple retirement plans?

Should you consolidate your multiple retirement plans?

July 28, 2021

Some people roll their old 401(k) plans over to simplify life and reduce fees

Individuals born towards the end of the baby boom generation (1957-64) held an average of 12 jobs from ages 18 to 52, according to the U.S. Bureau of Labor Statistics. That can quickly add up to many separate retirement plans along the way. If you have taken advantage of participating in employer-sponsored retirement plans from past jobs, you may find yourself with a variety of plans and accounts. These could be a combination of 401(k) accounts as well as any IRA or Roth IRA plans you may have set up for yourself.

The good news is this means you have saved for retirement! The bad news (not really bad, just frustrating) is that you have more accounts, vendors, fees, and statements that you need to manage. Each plan likely has different investment options, different fees, and different portals to log in to. Rolling over old 401(k) plans into an IRA account can give you the opportunity to streamline your finances and take control of your options.

Here are some benefits you may have by consolidating your old retirement plans:

  • Take Control of Fees
    Each plan sponsor has investment fees and expenses associated with it. If you evaluate your different accounts, you can determine which ones offer the best fees and see if you can roll over your other plans into this account. However, it is important to also consider what investment options and other professional portfolio management services are available. You may decide that you don’t want the lowest fee if that provider does not offer the investment options you want. This brings us to our next point…
  • Broader Options and Appropriate Investment Allocations
    Some 401(k) plans offer limited investment options leaving you without the flexibility to invest how you want to. Many 401(k) plans offer a small selection of mutual funds and target date funds. An IRA may open up a much wider selection of investment options to you. And you will have the ability to buy, sell, and rebalance your investments at any time where your 401(k) plan may limit the number of times you can do this per year. Also, some of your old plans may be allocated in ways that don't match your risk tolerance anymore. If your needs have changed, your investments should change along with your new needs. Sometimes your older plans don't align with your goals anymore.

  • Easier Withdrawal Planning
    When you enter those coveted retirement years and approach 72, you will have to start taking your Required Minimum Distribution (RMD) payments from your accounts. This can start to get more complicated with the more account types you have accumulated. You have to calculate and withdraw the appropriate amount from each type of account you have. And those different types of accounts have different rules surrounding RMDs. For 401(k) and 457(b) plan types, you have to take the appropriate RMD from each and every account that you have. If you have multiple IRA accounts, you can take all the RMD amount for those plans from a single IRA rather than having to schedule them from each and every IRA account you have. Combining accounts could make it much simpler for you planning your distributions in retirement.

  • Simplify Your Finances
    You can consolidate your plans in order to make it easier to keep track of where you are at with your retirement goals. And if you work with a financial advisor, they can also help keep you up to speed on how you are doing. Most old 401(k) account vendors do not provide much communication with you and working with an advisor is a great way to stay informed as well as have a resource to ask financial questions.

Talk with us about your retirement options that could best align with your goals. It is also important to be aware of the pros and cons of each option you have with your old 401(k) plan so you don’t create additional taxes or penalties for yourself. Read our detailed article on these options and schedule an appointment to review your specific situation. 

CALL: 208-629-4660 or CONTACT US for a review