Back to the Basics

In Back to the Basics, Investment Management, July 2016, Steward Articles by Adam Cufr

As people near and enter into retirement, one activity that is quite consistent among retirees is the consolidation of various retirement accounts. After decades of saving in multiple employer-sponsored retirement accounts and personal IRA accounts, the question becomes, “Can we combine some of these, to simplify our life?” The answer is, “Yes, you can.”

First, why would somebody wish to reduce the number of accounts they own, other than to simply have fewer to keep track of? There are several reasons:

Fewer accounts requires less time to manage. Since each account has beneficiary designations to keep up-to-date, asset allocations to monitor, and paperwork to organize, more accounts means more chance you may have forgotten one or two, or made an error.

Estate administration is made more cumbersome when more accounts are present. When the owner of multiple accounts passes away, there are more moving pieces to administer and more chance that an account was left out of a trust or must be probated.

Fees could potentially be lower if accounts are consolidated. Whether through fund breakpoints, or lower advisory fees for meeting higher per-account or per-advisor thresholds, ‘quantity discounts’ could mean more money in your pocket when you have fewer accounts.

At age 70-1/2, the owner of pre-tax retirement accounts must begin taking Required Minimum Distributions (RMDs). The rules are nuanced and the penalties for doing it incorrectly are steep; having fewer accounts makes this process much easier to carry-out correctly.

There are more reasons for holding fewer accounts, but let’s address which accounts can be consolidated and which cannot.

Accounts able to be consolidated with one another include:

Previous employer 401(k), 403(b), 457(b), Simple IRA, SEP-IRA, pension lump sum accounts (DROP, PLOP, etc.), and Traditional IRA.

Roth IRA and previous employer Roth 401(k) and Roth 403(b) accounts can usually be consolidated with one another as well, but cannot be combined with the accounts listed above.

Simply put, retirement accounts with the same tax treatment can generally be consolidated with one another. Again, there are many benefits to consolidation, so it makes sense to consider such a move. In order to go about consolidating accounts, there is generally paperwork required and a fair amount of patience. In the end, the rest of your life may not be made simpler, but at least your retirement plan is. Let us know if we can help you with this process.


Adam Cufr, RICP® (Retirement Income Certified Professional®) is a financial advisor and founding principal of Fourth Dimension Financial Group, LLC providing personal finance and retirement planning services. Adam is a Columnist for Retirement Advisor Magazine. He is also a sought-after media commentator and thought leader. Adam was named one of The 20 Most Creative People In Insurance in 2015 and is a columnist for Retirement Advisor Magazine and the author of Off the Record – Secrets to Building a Successful Retirement and a Lasting Legacy.

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