How combining accounts can help with your retirement savings

Americans change jobs as often as every five years.¹ While this may be good for one’s career, it can leave you juggling multiple retirement accounts, which means multiple statements and multiple passwords—and lots of calculations to figure out how much you’ve actually saved. You may also be paying fees on all those accounts, and that might not be the most cost-effective option for you.

One account can be easier to manage—with one statement and one number to call if you have questions or need help. Having all your retirement savings in a single account offers you a number of advantages, including:

• A more complete view of your retirement picture and any ongoing activity
• An easier way to track your progress toward your retirement savings goal
• Potentially fewer, and lower, fees than you were likely paying for multiple accounts
• Help focusing on a single investment strategy for your retirement investments

Even if you kept multiple accounts, you still couldn’t contribute more than the annual IRS contribution limits. And if you’re nearing retirement, a single account may make it easier to calculate and take your required minimum distributions (RMDs), which, for most of us, will start at age 72. 

If you prefer a single account, you may be deciding between a 401(k) or IRA. You could combine your accounts from past employers—such as 401(k)s, 403(b)s, and 457s—and IRAs into your current employer-sponsored retirement account. Or you could roll over those past accounts into an IRA. Whichever direction you go in, be sure to factor timing into your decision. If you’re still working, the IRS limits let you contribute more to an employer-sponsored retirement plan—such as a 401(k)—than to an IRA. And if you retire at age 55 and your employer’s retirement plan allows partial withdrawals, you may be able to take money out without paying a 10% early withdrawal penalty. On the other hand, IRAs may give you access to many more investment options—and that may be your deciding factor. 

The important thing is to maintain your retirement account’s tax-advantaged status, which is what sets your 401(k)s and IRAs apart from your personal savings accounts. One approach is to roll over the funds directly to your retirement plan account or IRA—because withdrawing money and depositing it in any other type of account could leave you with taxes and penalties to pay. If you’ve been saving in Roth accounts, you’ll have to manage those amounts separately from your traditional (pretax) 401(k) contributions. And in case you were wondering, you can only consolidate your own accounts—you can’t include your spouse’s. 

More of anything is frequently better—but having multiple retirement plans from past employers could make it hard to keep track of all of them. If you decide fewer accounts will make it easier to handle your retirement portfolio, contact your retirement plan administrator or your financial provider for more information. It’s important to have help managing the process, so you can make informed decisions. 

^{1 “Trends in Employee Tenure, 1983–2018,” EBRI Issue Brief, Employee Benefit Research Institute, February 2019.}