401(k) and IRA–or not

Question: Is there any advantage to having both an IRA and a 401k? When I quit my job, the 401k that I had was rolled over into an IRA. When I couldn’t find a better job, I went back to my old employer and was once again enrolled automatically into the 401k plan. I have been sitting on the IRA for about a year now and have not added anything. Should I maintain it, or should I try to consolidate it with the 401k? Lauren, Portland, OR

Answer: The advantage of keeping the IRA is that you’ve chosen the investment company and the investment options rather than your employer.

That’s why so many people like to have both. The exception is when the employers plan is really cheap and offers terrific options. For instance, it’s tough to beat the razor thin fees and broad-based investment choices in the federal government’s thrift savings plan. I’d put the money back into your employers plan (assuming the plan allows it) if you think it has the best investment choices for your retirement savings. Otherwise, I’d keep the IRA.