Learn how to combine accounts to make it easier to manage your retirement savings—and 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 into a single retirement account (often called a rollover).
Let’s go over two ways you can consolidate your accounts.
You can usually roll over retirement accounts online or by phone with a provider of your choice (including Principal®) if you want to do it yourself. You may need to track down paperwork from former employers.
A financial professional can help you track down your accounts, work with you on paperwork to move your accounts, and discuss your options. Don't have one? We’ll help you find a financial professional in your area.
What are your options?
- Rollover an old 401(k) to an IRA.
- Rollover an old 401(k) to your current employer’s 401(k)—if the plan accepts incoming rollovers.
- Move an IRA to a 401(k) plan—if it accepts incoming rollovers.
- Combine multiple IRAs into one IRA.
Here are seven possible advantages to consolidating your retirement accounts.
You’ll get a clearer picture of your total mix of investments when you consolidate accounts. Investing in a mix of options like stocks, bonds, mutual funds, etc. (known as diversification) may help you manage risk while still working toward your goals.
Rebalancing resets your investments so they’re back in line with your original risk tolerance. And the fewer accounts you have, the easier it may be to rebalance once a year. Over time, some investment returns may fluctuate more than others. So, after a while, your mix of investments isn’t the same as when you started. You could be taking on more risk (or less) than you originally intended.
Each of your accounts has a different rate of return (the gain or loss from your investments). Calculating your total rate of return across all accounts can be complicated. If your assets are in one account, you have a single, easier-to-understand number.
Most retirement accounts have annual fees. The fewer accounts you have, the less you may pay in maintenance fees.
If you need to change your address or update your beneficiaries, for instance, it’s less hassle when you’re managing one account.
Using a tax-efficient investing strategy can be complicated when working with multiple accounts. One account may be easier.
After you reach age 73, the IRS requires you to take some of your retirement savings each year from qualified retirement accounts like 401(k)s, 403(b)s, and most IRAs.
