“I am 40 years old and have worked for 5 employers in the last 20 years. As a result, I have 401k accounts at 3 of my private sector employers and 403b accounts at 2 non-profit employers. The total amount is about $80,000. Should I leave the accounts at the employers or consolidate them into a single IRA Rollover Account?”
J. D., Phoenix, AZ
You should definitely consolidate all your 401k and 403b accounts into one Rollover IRA Account. Here are the potential advantages:
- Lower costs if you use the right investment choices (lowest cost ETF’s/low cost mutual funds/individual stocks)
- More investment choices than the ones offered by any employer-sponsored retirement plans
- Easier to manage and track
- Easier to coordinate your total asset allocation
- Simpler to manage your risk management with one account versus 5 accounts.
There are 2 disadvantages to consolidating your 401k and 403b accounts:
- While you can borrow from a 401k or 403b account, you cannot borrow from an IRA account. However, a key “rule” for financial success is that one should avoid borrowing from any retirement account.
- The initial transfer/rollover paperwork can be a pain. However, once the paperwork is done, all the benefits last a lifetime.
Any of the discount brokerage firms (for example, Fidelity, Schwab, eTrade, TD Ameritrade, MerrillEdge) can help you with your 401k and 403b rollover process. In addition, our blog post “Forced IRA Rollovers” can also provide some insights for you.