6 Reasons to Consolidate Retirement Accounts

30-06-2018 | dojo |

6 Reasons to Consolidate Retirement Accounts

You can consolidate retirement accounts easily, by combining multiple accounts into one IRA account you already own or a new one you open for this. In the finance literature this is called an IRA rollover or IRA transfer.

Are there any reasons why you should combine retirement accounts?

It’s easier to manage one account instead of multiple ones

Most people have multiple retirement accounts. Each with its own funding rules and taxes.

If you combine more retirement accounts, you can easily select the investments that are more lucrative and track your progress without any complications.

Smaller fees when you consolidate retirement accounts

Retirement accounts (IRA, for instance) require a custodian to report your transactions to the IRS, so that they can calculate your taxes. The more accounts you have, the more custodians you need to pay (and most require an annual fee).

If you make a transfer (buy or sell), a transaction fee is also charged, so, the less accounts you have, the less transactions you’ll make.

No more missed required minimum distributions

Another ‘nice’ thing to have in mind with your IRS retirement accounts is that, once you reach 70, you have to withdraw a minimum amount of money every year. This is a required minimum distribution and failing to do so will result in penalties.

With multiple accounts, it becomes even harder, since you have to track each of them and make sure you don’t miss your required minimum distribution.

By combining your retirement accounts, there are fewer to keep up with and less chances to get penalized.

Save more time for yourself

We all care about saving money, when it comes to personal finance, but few people actually think that TIME is even more precious. Especially for a retiree.

Instead of wasting time with separate stocks, CDs, mutual funds and bonds in separate retirement accounts, by having everything in one place will save you a lot of time.

It’s easier for your beneficiaries, if you consolidate retirement accounts

Running several retirement accounts is a hassle from any point of view, even when it comes to update beneficiaries.

Not to mention that, if something happens to you, they’ll find it easier to track one account and not more of them.

An easier retirement planning job for you

Retirement planning is tedious work and yet very important.

Failing to properly plan for your golden years can leave you open to financial distress later in your life.

Managing multiple accounts and planning each financial move is quite difficult.

We already mentioned the required minimum distributions, the money you need to withdraw each year from your retirement accounts. But there’s something more – what if you use up your money too quickly?

In this case you need to care for a so-called sustainable withdrawal rate, how much to take out of your retirement accounts on an yearly basis and still have enough to last you a lifetime.

If you have fewer accounts to manage, all these calculations are easier to make and your retirement planning more effective.

These are just 6 reasons to consolidate retirement accounts. Do you have any other reasons you can think of?

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