Investing Retirement Planning IRAs The Most Important Reasons to Consolidate Retirement Accounts By Dana Anspach Dana Anspach Twitter Dana Anspach is a Certified Financial Planner and an expert on investing and retirement planning. She is the founder and CEO of Sensible Money, a fee-only financial planning and investment firm. learn about our editorial policies Updated on May 28, 2022 Reviewed by Chip Stapleton Fact checked by Ariana Chávez Sponsored by What's this? & You can consolidate retirement accounts by transferring money from multiple accounts into one established IRA account (or into a new IRA you open). This is called an "IRA rollover." Here are several good reasons to consolidate your IRAs, 401(k)s, and other retirement accounts. Easier to Manage Investments Hero Images / Getty Images Once you retire, you'll need to figure out how to structure your investments so they will continue to generate gains while providing enough steady income for you to live on. This is difficult to do when you have multiple accounts. When retirement accounts are combined, you can more easily select your investments to meet both your short-term and long-term needs. You might consider investing using a time segmentation strategy: Purchase bonds or CDs that will mature in different years, so you will be able to count on a certain amount of income becoming available each year. If you can handle the risk, purchase stocks that may generate bigger returns over the longer term. Reduced Fees Tin Pixels / Getty Images Retirement accounts like an IRA require a custodian that must report contributions and withdrawals to the IRS for tax-reporting purposes. Most custodians charge an annual fee. The more accounts you have, the more fees you'll pay. When you buy or sell an investment, a transaction fee may be charged. If you consolidate accounts, you should make fewer total sales and purchases over time, which would result in lower total transaction fees. Some investment management companies reduce or even waive fees when your account reaches a minimum size. One of the best ways to increase your investment returns is to reduce the investment fees you pay, and consolidating accounts helps in that regard. No Missed Required Minimum Distributions Jose Luis Palaez Inc/Getty Images Once you reach age 70 1/2, there is an IRS formula you must follow that determines a minimum amount you are required to take out of your retirement account each year. This is called a "required minimum distribution (RMD)." Due to changes made by the SECURE Act, if your 70th birthday is July 1, 2019, or later, you do not have to take withdrawals until you reach age 72. If you have multiple accounts, each financial firm will send you paperwork or an email each year, notifying you of your RMD. That can be a hassle. As you get older, it can be easy to overlook these notifications. And if you fail to make an RMD, the IRS makes you pay 50 percent of the amount you should have withdrawn as a penalty. You'll find it will be much easier to consolidate your accounts and take one distribution from one IRA account each year rather than trying to manage distributions from multiple 401(k)s and IRAs. The IRS permits you to take your RMD from only one IRA account when you have more than one, but you would still need to figure out the total RMD you must take, based on the values of all of your IRA accounts. However, for all other types of retirement accounts, including 401(k)s, you have to withdraw the RMD separately from each account. To make your life even easier, you can work with your financial institution to set up the RMD so it will be broken up into installments and become more like a steady paycheck. More Free Time Cultura RM Exclusive / Uwe Umstaetter / Getty Images Ultimately, combining accounts will free up time. There will be less mail and fewer emails to read, fewer passwords to track, fewer pieces of paper to file away, and less time spent looking for information. You won't need to keep spreadsheets to track investments across multiple accounts, and if you link accounts to an online service such as Quicken, you'll have fewer linking issues to troubleshoot. When you need to make changes, such as to your email address, mailing address, phone number, and beneficiary, you'll need to make only one phone call. Your investments can be just as safe and diversified if you combine accounts with one well-established custodian. Inside of a brokerage account, you can own mutual funds, stocks, bonds, and even CDs. You don't need to have your investments spread across several financial institutions. Simplify your life and consolidate. It will take time and paperwork to combine the accounts, but once you do, you'll find that your time invested will provide a good return in time saved. Easier for Beneficiaries Hero Images / Getty Images After you die, it will be much easier for your beneficiary or beneficiaries to deal with one consolidated account rather than having to track down accounts in numerous places. Combine your retirement accounts so your loved ones won't be faced with a hassle one day. As with any issue regarding retirement accounts, it's important to keep your risk tolerance in mind. There isn't necessarily any risk associated with consolidating retirement accounts, but once the funds have been combined, you will have to make decisions about how those funds are invested. Those who are in, or close to, retirement may prefer relatively low-risk investments like Treasury bonds and CDs. Those who have decades until retirement may prefer relatively high-risk investments like growth stocks. Frequently Asked Questions (FAQs) Where is a safe place to invest retirement money? While no investment is entirely safe, some investments are safer than others. Retirement investments that come with less risk include savings accounts, certificates of deposit, Treasury securities, fixed annuities, and money market accounts. Where should I start if I want to combine my retirement accounts? When combining your retirement accounts, you'll start by opening a rollover account or deciding which existing account you want to use. You'll then need to contact the plan administrators for the accounts you want to roll over so they can remove funds from those accounts to fund the account you'll be using. You'll need to fill out forms and give instructions for how you want that money disbursed. Once the transfers have been made, you can decide how you want to allocate those funds within your account. What is a retirement plan indirect rollover ? An indirect rollover occurs when you receive a pre-retirement payment from your retirement plan and put it into another retirement plan. You don't go through the formality of rolling it over directly. With an indirect rollover, you receive a direct payment and have 60 days to deposit the money into a different retirement account without paying taxes and penalties. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Internal Revenue Service. "Publication 590-A (2020), Contributions to Individual Retirement Arrangements (IRAs)." Internal Revenue Service. "Retirement Topics — Required Minimum Distributions (RMDs)." Internal Revenue Service. "RMD Comparison Chart (IRAs vs. Defined Contribution Plans)."