What to Do with All Those Old 401(k)s and IRAs
It's about as fun as herding cats, but rounding up all your IRAs and 401(k)s into just one or two accounts can really simplify your financial life.


By age 50, baby boomers have held an average of 12 different jobs, according to the Bureau of Labor Statistics. In many cases, they may have several company retirement plans from old employers, as well as an IRA or two, along with at least one Roth IRA.
By combining these accounts, you may be able to save both time and money and make your life more stress-free. Say, for example, you have three IRAs, two old 401(k) plans, an old Simple IRA and an old 403(b) plan. These seven different accounts can actually be transferred into one IRA. There are several reasons why you might want to do that.
Less Expensive
When you buy or sell an investment, a transaction fee is often charged. If you consolidate your accounts, you may have fewer total buys and sells, which could significantly reduce fees andboost your net return.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, if you wanted to purchase 12 different investments for diversification, by consolidating, you could just buy those 12 investments all in one account.
However, if you had the seven accounts in our example, and you wanted to be diversified over 12 investments in each account to reduce risk, you would be trading 12 investments in seven accounts — or 84 total different investments — which could create a lot more transaction fees.
Also, some companies reduce or waive fees if your account reaches a minimum size, so combining accounts increases the likelihood for this to happen.
Reduces RMD Errors
Once you reach age 70½, you must take a required minimum distribution from your pretax retirement accounts each year. Failure to do so will result in a 50% penalty on the required distribution that was not taken.
If you have multiple accounts, each financial firm will send you paperwork each year to take this RMD. As the years pass it can be easy to overlook paperwork that arrives and miss this required distribution.
You'll find this less likely to happen if you consolidate your accounts and take one distribution from just one IRA.
Simplifies Investing
Consolidating accounts will make it much easier to manage your investments. You can focus on the performance of one account, instead of watching the performance of seven different accounts. It is also more convenient to work with one very good IRA custodian with good service and investment choices rather than seven.
Also, once you retire you may need to structure your investments to get monthly income. With seven different accounts, often people end up getting seven different checks, as opposed to receiving one check on one IRA.
Saves Time
Ultimately, combining accounts will free up time. It will mean fewer statements to read, forms to fill out, information to look up and passwords to remember.
And when you need to make changes, such as an e-mail address or an investment change, you'll only need to make one phone call.
Combining accounts also makes it much easier to verify that your beneficiaries are up-to-date and none are overlooked.
Downsizing, relocating to a retirement community, or moving to be closer to family can increase the chances that you may lose track of old retirement plans, because when you move you may forget to update all the multiple addresses on your retirement accounts. If you consolidate these accounts into one, this is less likely to happen.
Getting Started
While you may not be so lucky as to get all of your different retirement accounts and IRAs into one account, any reduction in the number of accounts will help. Also, once you retire, you may be able to boil your portfolio down to no more than two retirement accounts: a traditional IRA for pretaxretirement accounts and a Roth IRA to combine all the Roth accounts.
When combining retirement accounts, transferring the assets directly from one retirement account to another where you make the check payable directly to the new custodian on yourbehalf is the most hassle-free way to do it. It avoids unnecessary headaches like the 20% withholding on indirect rollovers, or the possibility of missing a 60-day rollover deadline when you take receipt of the funds.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
The Five Best Side Hustles for Retirees
More older people are working in retirement to boost income and stave off boredom. These gigs and hustles make the most sense for the golden years crowd.
-
Apple Rolls Out AppleCare One to Simplify and Expand Device Protection
Apple's new multi-device plan brings extended coverage, theft protection and the ability to insure older gadgets.
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
An Investment Strategist Takes a Practical Look at Alternative Investments
Alternatives can play an important role in a portfolio by offering different exposures and goals, but investors should carefully consider their complexity, costs, taxes and liquidity. Here's an alts primer.
-
Ready to Retire? Your Five-Year Business Exit Strategy
If you're a business owner looking to sell and retire, it can take years to complete the process. Use this five-year timeline to prepare and stay on track.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.
-
The Big Red Bucket Theory: A Financial Adviser's Simple Way to Visualize Your Retirement Plan
When you think about retirement, picture a big red bucket brimming with all the money you've saved. It's everything you've got, and it has to last you.
-
A Guide to Personalizing Your Retirement Plan for Maximum Impact
This strategy challenges conventional retirement rules of thumb by combining traditional savings, home equity and annuities to provide higher income and liquid savings and help cover long-term care costs.