Time to consolidate accounts
Question: I have been very fortunate to stay almost continually employed despite three layoffs in 10 years. I have also contributed regularly to my employers’ sponsored, tax-deferred retirement plans. In the process, I have acquired several accounts managed by Fidelity, including one at my current employer. (Some employers set up three or four accounts.) Is there any downside to rolling over accounts linked to a specific employer to one Fidelity account? I’m just looking to simplify managing my accounts. Thanks! Kathy, Warrenville, IL
Answer: Congratulations on keeping up your retirement savings despite multiple layoffs. Even though all the accounts are at one financial services company, my vote is for simplifying your accounts and money management.
You have a couple of options. Your current employer may allow you to gather up the money from your previous 401(k) accounts and add it to your current 401(k). It’s a fine choice if you’re happy with your current plan. Of course, this assumes your current employer allows the transfer. They don’t have to and not all companies do permit it.
That said, even if the transfers are OK with your current employer, it often makes sense to roll the previous accounts into a rollover IRA. (You’re leaving your current plan alone. You can’t roll it over while you’re working there.) With a rollover IRA, the money is under your control. You get to choose where to invest it.
If you roll the money into an IRA, make sure it’s an institution-to-institution transfer. It’s a simple way to preserve the tax-sheltered status of the money. Check with the human resources department of your former employers for their procedure on transfering the money, as well as with your financial institution (Fidelity, if that’s where you decide to consolidate investments).
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.