By Sarah Brenner, JD
Director of Retirement Education

As you approach your golden years, you may be looking to simplify your life to wring the most out of retirement. It may be time to right size and move from a larger house with an abundance of maintenance to a smaller space that is easier to manage. It may also be time to declutter and organize years of belongings. Make a new start. Retirement accounts should not be overlooked as part of this process. Consolidating these accounts can go a long way towards simplifying life.

The days of retiring with a pension after 40 years with the same company are long gone. It is not unusual for today’s retirees to have worked multiple jobs and participated in multiple employer plans. Sometimes assets get left behind in plans long after workers leave employment simply because the participant never got around to moving the dollars out. You may have multiple, mostly overlooked IRAs with a multitude of different financial institutions, from banks to credit unions to mutual fund companies.

Consolidation Benefits

There are multiple benefits to consolidating retirement accounts, starting with less account information to track. Additionally, overlooked and left-behind employer plan and IRA assets may not be performing as well as they could be if actively managed. This can not only result in lost investment opportunities, it can also create escheatment issues. States are becoming more aggressive going after unclaimed property, and IRAs and plans are no longer off limits.

Required minimum distributions (RMDs) can also be a problem when an individual has multiple retirement accounts. The more RMDs that need to be taken, the more likely it is that a mistake will be made.

IRA Rollover Advantages

An IRA is a great place to consolidate retirement funds. It can help you stay in control by not having to keep track of several company plans and IRAs — along with all the beneficiary designations and withdrawal options for each account. Consolidating into an IRA also helps ease the burden of taking RMDs. After consolidation, you will no longer have to worry about RMDs from both your plan and your IRA.

Within an IRA, there is a universe of investment options to choose from which far exceeds the limited number of investments typically offered by an employer plan. An IRA owner can customize investment choices to meet her personal needs. Changes to fit risk tolerance and retirement needs can be made instantly.

The bureaucracy you may face when dealing with a plan can also be avoided. Employer plans may also have restrictions on withdrawals, but IRA owners generally have immediate access to funds, regardless of age. Also, qualified charitable distributions (QCDs), which are available at age 70½, can only be made from IRAs, not plans.

If you have a number of different retirement accounts cluttering things up, it may be time to consolidate and simplify!