Key takeaways

  • If you have several 401(k)s and IRAs, consolidating your accounts may help make managing your investments easier, as well as potentially reduce associated fees.

  • A financial professional can review your accounts and their associated fees and investment selections to help determine which to keep and which to consolidate.

  • Once you’ve consolidated accounts, revisit your asset allocations and rebalance as necessary to ensure they’re still in line with your risk tolerance level.

After a decade or more into your career, you may have changed jobs and opened 401(k) accounts with more than one employer. You also may have started a traditional or Roth IRA for additional retirement savings. 

The more retirement accounts you have, the easier it is to lose track of them. If you’re worried that your retirement savings may not be working hard enough for you, following these four steps can help you feel more in control.  

“If you have a 401(k) balance that you feel is small, the worst thing you can do is to just cash it out.” 

Jacob Kujala, senior product manager with U.S. Bancorp Investments

1. Find and track all your retirement savings accounts

First, review your financial records to assess how many 401(k) and other retirement accounts you have, where they’re located and their balances. Maybe you have one or more 401(k) accounts from multiple employers. Maybe you rolled over a 401(k) account from a previous job into a new 401(k) or a traditional IRA, or perhaps you cashed out instead. 

If you find a retirement account you’ve forgotten, avoid treating it like an unexpected windfall. “If you have a 401(k) balance that you feel is small, the worst thing you can do is to just cash it out,” says Jacob Kujala, senior product manager with U.S. Bancorp Investments. 

If you leave your previous 401(k) in place, your investments have the potential to compound over time. Conversely, repeatedly cashing out can set back your retirement savings. In addition, if you’re younger than 59½, withdrawing money from a 401(k) will generally trigger a 10% penalty plus federal and state income taxes on the distribution.


2. Consider consolidating retirement accounts

Once you have a handle on your accounts, you may want to think about consolidation. For this step, it might be advantageous to work with a financial professional who can review your overall financial goals and suggest which types of accounts best fit your situation. “We want to make sure we understand the money’s purpose before we consolidate,” Kujala says. 

To get started, collect the most recent statement from each retirement account, even if they’re a couple of quarters old. You can generally find quarterly statements online. From there, you and a financial professional can review these statements to help you decide which accounts to keep and which to consolidate. This involves looking at each retirement plan’s investment choices, fees, and maintenance.

How to roll over your 401(k)

If you want to roll over old employer-sponsored accounts without paying taxes or penalties, you have several options depending on the account type. 

  • Choose the type of account you want to move your money into. Be sure to research the investment choices, fees and other details of the retirement savings plans you are considering.

  • If you have a 401(k) from a former employer, you can roll it over into a current 401(k). You also can roll over a 401(k) into a traditional IRA.

  • If you have a Roth 401(k) account, you can roll it over into a Roth IRA.

  • Open an account with the bank or brokerage that will hold the retirement funds you’re rolling over.

  • Contact the 401(k) administrator from your previous account and request a direct rollover. Make sure to follow any instructions from the new account administrator about completing the transfer.

  • If the 401(k) administrator can send the funds wirelessly, make sure they are deposited correctly in the new account. If you choose to receive a check, make sure to transfer the funds to the new account within 60 days to avoid paying taxes and penalties.

The process of moving funds between accounts can vary. Again, working with a financial professional may help. 


3. Rebalance your portfolio and allocations

When you first set up your 401(k) or other retirement accounts, you likely chose to allocate your contributions between several types of investments, such as stocks and bonds, based on the level of risk that seemed appropriate for your age and current situation. If you’re consolidating accounts, this is also a good time to review investment allocations. 

The further you are from retirement, the more exposure you can have to stocks, which tend to be more volatile than fixed-income investments but also can outperform them over a longer period. For example, contributions to a Roth IRA are made with after-tax dollars, so you might select more stock exposure. In the long run, stocks are likely to generate larger investment gains than bonds, and you won’t have to pay income taxes on those Roth IRA gains when making withdrawals — as you would with a 401(k) or traditional IRA. 

“If you get the most growth in an asset that has already been taxed and won’t be taxed again, you get the most benefit long term,” Kujala explains.

As you approach retirement, you can adjust your allocations, moving away from riskier equities and toward more stable, fixed-income holdings. You may want to consider a type of mutual fund called a target date fund, which is a mix of investments based on your expected retirement year. Target date funds are broadly diversified and automatically adjust as your targeted retirement year approaches. 

Again, it may help to talk with a financial professional about rebalancing your portfolio to suit your current age and retirement goals. 


4. Assess your total savings

Once you have your retirement accounts under control, take a look at your overall savings. Make sure you have three-to-six months’ worth of your household income set aside (and easily accessible) for emergencies. “One way to quickly derail a great retirement savings plan is to have a financial emergency come up where you have to use your retirement funds, potentially triggering a penalty and certainly triggering income taxes on the distribution,” Kujala says. “Having an emergency fund can help you avoid that problem.” 

Also, make sure you’re satisfied with the amount you’re saving for retirement. A general rule of thumb is 10-15% of your pre-tax salary each year. And finally, don’t forget to diversify your investment accounts. Doing so can help you reduce risk, maximize your savings and potentially lower your taxes.

After your retirement accounts are organized, consolidated, and rebalanced as necessary, review them annually. Armed with a clear picture of your savings, you can feel more confident about being on track for a financially healthy retirement. 

Learn how we can help you plan for retirement.

Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. All investment strategies have the potential for profit or loss. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. There are no assurances that a portfolio will match or outperform any particular benchmark.

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