Learn how to find and combine accounts to make it easier to manage your retirement savings—and help cut down the multiple investment decisions, statements, fees, and communications.
If you’re like many people, you’ve probably had a few jobs over the years. That means you probably also have (at least) a few different retirement accounts.
Multiple retirement accounts may mean multiple investment decisions, statements, fees, emails, and logins. And it can make it tough, overall, to manage your retirement savings. Some people even lose track of old retirement accounts altogether. This can happen more easily than you’d think—especially if you forgot to change your address if you moved. (Who remembers to update their address with their past employers?)
In most cases, you don’t have to leave those old accounts as-is. Instead, you may be able to combine them (sometimes referred to as consolidation) into a single retirement account (often called a rollover). Here’s why you may consider this option, and what steps to take.
There are a number of benefits to combining 401(k) accounts—some of them practical, some to help with future planning.
- Manage and rebalance your investments. If you need to change your address or update your beneficiaries, it’s less hassle when you’re managing one account. Consolidation also gives you a clearer picture of your total mix of investments. You may be better able to review your diversification—your mix of stocks, bonds, mutual funds, etc.—to ensure it’s aligned with your risk profile. As a reminder: Investments fluctuate over time, which may mean the proportion allotted to match your risk profile gets out of whack. Rebalancing is simply re-aligning that balance—easier to do once a year when you have just one account to manage.
- See your overall returns. Calculating your total rate of return (the gain or loss from your investments) across all accounts can be complicated. If your assets are in one account, you have a single, easier-to-understand number.
- Minimize fees. Most retirement accounts have annual fees. The fewer accounts you have, the less you may pay in maintenance fees.
- Calculate taxes and required minimum distributions. Multiple accounts may equal planning headaches when it comes to taxes and required minimum distributions. For example, after you reach age 73, the IRS requires you to withdraw a minimum amount from your 401(k) accounts every year—called a required minimum distribution or RMD for short. While most financial institutions calculate your RMD for you, you’re ultimately responsible for withdrawing the correct amount. Having just one account can make that easier. Withdrawing less than your RMD, or missing the deadline, can lead to a tax penalty of up to 25% on the amount not withdrawn.
A couple of steps helps you get from multiple accounts to one. Here’s what to do.
Find information on all your accounts. Perhaps you’ve kept meticulous track of everything you’ve ever contributed to; that’s great. If not—or if you’re just curious if you do have notes on all your previous savings—there’s a way to check. The National Registry of Unclaimed Retirement Benefits allows you to search by Social Security number for any unclaimed balances. It’s free, and if you find an account, you’ll receive the plan sponsor/custodian contact information to claim the funds.
Check what’s allowed by your current plan. Many, but not all, 401(k) plans allow rollovers. Some may have specific conditions in which they’ll allow one. Best to check with your plan, first, to ensure you can consolidate. (If your plan is through Principal, log in to your personal dashboard. Click on your 401(k) account information; on the top menu, click on “Rollovers.”)
Choose the option that works best for you. In general, if consolidation is allowed, you may have four options to choose from:
- Rollover an old 401(k) to an IRA.
- Rollover an old 401(k) to your current employer’s 401(k)—if allowed by the plan.
- Move an IRA to a 401(k) plan—if allowed by the plan.
- Combine multiple IRAs into one IRA.
Which one works best for you? Learn more about options for consolidating your retirement savings (PDF).
DIY the consolidation, or get some help. Once you’re ready, you may complete the consolidation by yourself (typically online or by phone with your provider such as Principal.) To do this, just ensure you have paperwork ready, including account numbers and contact information. Or, you can work with a financial professional.
Once you’ve consolidated your retirement accounts, getting a snapshot of your progress may be easier using tools like the Principal Retirement Wellness Planner. It tracks how well you’re progressing toward your retirement savings goal with a personalized Retirement Wellness Score (login required). Or, if you don’t have an account with Principal, visit the public Retirement Wellness Planner.
