Key takeaways

• Consolidating 401(k) accounts can make it easier to manage your investments and keep track of your overall financial picture.
• Combining accounts may help reduce fees, simplify tax reporting, and streamline required minimum distributions (RMDs).
• Many investors choose to consolidate old 401(k)s into an IRA for greater flexibility, more investment options, and access to advice.

Managing multiple investment accounts across different financial institutions can come with challenges, including keeping track of your overall financial picture, staying on top of taxes and strategies, and navigating different rules and fees. Over time, you may accumulate several 401(k) accounts as you change jobs, particularly if you’re not sure what happens to your 401(k) when you leave. Consolidating 401(k) accounts can help simplify how you manage your money.

Carefully consider all your options, including tax implications, fees, and expenses, before moving money between accounts. Assess all features of current accounts before moving money.

What does it mean to consolidate a 401(k)?

Consolidating a 401(k) means combining one or more old workplace retirement accounts into a single account. While you may be eligible to leave your savings in a former employer’s 401(k) plan, you may also be able to roll over the 401(k) funds into their new plan or complete an individual retirement account (IRA) rollover. This process is often referred to as combining or consolidating 401(k) accounts into one account.

5 potential benefits of consolidating 401(k) accounts

Here are five benefits that can come from consolidating or combining your retirement accounts. 

1. A clearer view of your retirement savings

Bringing your accounts together can be a helpful first step to get a clearer view of your finances, including whether your investments are diversified, whether you are maintaining your target asset allocation, and whether you’re on track with retirement savings goals.

Read more: Average asset allocation by age

2. Easier portfolio management

When you have multiple accounts across different financial institutions, it can be difficult to maintain a consistent investment strategy. With fewer accounts, it can be easier to rebalance your portfolio, avoid overlapping investments, and stay aligned with your risk tolerance. It can also make it easier to think through tax optimization strategies, such as how investments may be taxed over time and when to realize losses.

3. Potentially lower fees

In some cases, consolidating 401(k)s and other retirement accounts can help reduce fees by cutting down on multiple account charges, potentially lowering investment costs, and avoiding overlapping fees. One account with a larger balance may also qualify for lower fees or better pricing, depending on the provider. This may not apply when consolidating into an employer-sponsored plan, where fees are set by the plan.

4. Simplified required minimum distributions (RMDs)

Certain retirement accounts like 401(k)s and traditional IRAs require the account holder to take RMDs at age 73. At the same time, it’s important for people nearing or entering retirement to determine a sustainable withdrawal rate to help ensure their retirement savings last for their lifetime. With fewer accounts, it may be easier to evaluate and implement your withdrawal strategy to ensure you are meeting IRS rules and making effective decisions. RMDs are not required for Roth IRAs.

5. Less administrative hassle

The more accounts you have, the more logins, passwords, and administrative tasks there are to remember. By consolidating 401(k) accounts, you can take care of tasks like managing beneficiaries, reconciling balances, and updating account information in one place. Plus, it can also make tax time simpler, with fewer forms to review and include on your tax return.

Read more: How to roll over a 401(k)

Why investors may consider consolidating into an IRA

Rolling over a 401(k) into an IRA is a common choice. In fact, about 62% of traditional IRA–owning households have rollover assets from employer-sponsored retirement plans.¹ Be sure to compare accounts fees, as IRAs can have higher fees that employer plans.

More investment choices and control

IRAs often offer a wider range of investment choices than workplace plans, which typically limit you to a pre-selected menu of funds, unless there is a brokerage option. This added flexibility can make it easier to build a portfolio that aligns with your goals. IRA investment choices may include stocks, bonds, mutual funds, ETFs, index funds, and in some cases, certificates of deposit.*

Tax advantages

When you roll over your 401(k) into an IRA, your money remains invested on a tax-advantaged basis, meaning you won't pay taxes at the time of a direct rollover. You have exactly 60 days from the day you receive a distribution of retirement money to deposit it into another eligible retirement account like an IRA in order to preserve its tax-advantaged status.

Potentially greater flexibility and access to advice

Consolidating your retirement savings into one account can provide access to a range of investments and can make it easier to work with a financial advisor to build a more personalized strategy. In some cases, having a higher balance in a single account may provide access to a broader range of services, tools, or support, depending on the provider. Many investors who choose to roll over their 401(k) take a full approach — one study found that 86% rolled over their entire account balance in their most recent rollover.²

Should you combine 401(k) accounts?

Whether you should combine your 401(k) accounts depends on your situation. Consolidating can make it easier to manage your investments, reduce fees, and stay aligned with your goals. However, it may make sense to keep your savings in a current plan in some cases. Be sure to compare all of your options carefully.

If you’re ready to move your savings, learn how to roll over a 401(k) and consolidate your accounts step by step.