How to Consolidate Your Retirement Accounts

Step-by-Step Guide

1. 1

   Step 1: Get paperwork for all retirement accounts.

   Find your plan description.
   
   You will also want recent statements so that you know the balance in each account.
   
   Make sure the paperwork is recent—preferably within the past 60 days.
   
   You’ll want to look at the rules for whether you can transfer funds into different accounts.
   
   If you don’t know, you should call the plan administrator and ask.
2. 2

   Step 2: Identify the account that will receive the transfers.

   Generally, you’ll want to transfer or roll over funds from multiple retirement accounts into your best performing retirement account.It’s also possible to create a new IRA and transfer all existing accounts into it.
   
   Consider the following when identifying which account will receive the transfers:
   Performance over time.
   
   Remember to make an apples-to-apples comparison.
   
   If you have most of your funds invested in bonds in account A, you can’t compare it to account B, which is heavily invested in equities.
   
   Investment options.
   
   IRAs generally offer more investment options than employer-sponsored 401(k) plans.
   
   Fees.
   
   Investors will charge fees for managing the account and when you withdraw money.
   
   You might want to consolidate funds in an account that has the lowest fees.
   
   Tax advantages.
   
   With a traditional IRA, your contributions are tax deductible and you pay taxes at ordinary income tax rates when you get distributions.
   
   With a Roth IRA, by contrast, you fund your account with dollars you have already paid taxes on.
   
   However, your withdrawals will be tax-free., You might not be able to consolidate some retirement accounts.
   
   Or you may be able to transfer the funds but lose certain tax advantages.
   
   The IRS has a helpful chart available here: https://www.irs.gov/pub/irs-tege/rollover_chart.pdf.
   
   Consider the following:
   IRA.
   
   You can transfer a traditional IRA into another traditional IRA or even a Roth IRA (after paying taxes). 401(k).
   
   You can transfer the 401(k) into an IRA.
   
   Also, some companies might let you combine an old 401(k) with theirs, but this is up to the company’s plan.Read the policy.
   
   Tax-sheltered annuity.
   
   These plans, typically called 403(b) plans, can be rolled over into a traditional IRA, Roth IRA, and qualified plans, such as a 401(k).
   
   Employer stock.
   
   You can roll stock into an IRA but you’ll lose tax advantages., Some people borrow from their retirements accounts for a variety of reasons.
   
   You’ll want to assess if you’ll need the money, because this will determine which account you should merge the others with.
   
   For example, you’re not allowed to take loans from an IRA, but you may be able to from an employer’s plan.If you think you’ll need to take loans from your retirement accounts, don’t consolidate them into an IRA.
   
   However, you can use some of the money in an IRA for school expenses or to buy a home.
   
   You can’t with a 401(k).
   
   You want to retire early.
   
   Generally, you have to pay a 10% penalty for withdrawals taken before age
   59.5.
   
   However, you can begin drawing from a 401(k) at age 55 without penalty.
   
   This option isn’t available for an IRA, so don’t rollover your accounts into an IRA if you want to retire early., Only an experienced financial planner can provide tailored advice for how to combine your retirement accounts.
   
   You can find a financial planner by looking in your phone book or searching online.
   
   Also ask people you know for referrals.
   
   Look for a financial planner with the Certified Financial Planner designation.
   
   To qualify, they must pass a professional exam.Enter your location at this website: http://www.plannersearch.org/.
   
   There are also tax implications involved whenever you are dealing with retirement benefits.
   
   You may want to consult with a qualified tax professional to make sure that you carefully decide what is the best course of action.
3. 3

   Step 3: Check whether you can transfer funds.

4. 4

   Step 4: Assess if you will need the money early.

5. 5

   Step 5: Talk to a professional.

Detailed Guide

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