Asked by John  |  Submitted October 24, 2013

I have a few 401(k)'s from previous companies that I worked for, should I combine them into an IRA?

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  Answers  |  8

October 24, 2013

I recommend you roll over old 401(k) plans into an IRA for 2 very good reasons: 1) you will rid yourself of 401(k) administrative fees that can be as high as 2-3%+ per year and 2) you will access a broader universe of low cost mutual funds and Exchange Traded Funds. I recommend Vanguard as a great starting point, given their range of low-cost funds. The difference can be significant since many 401(k) plans are populated with funds that charge 1% or more per year. If you add up administrative and underlying expense ratio fees, you may be paying 3% or more per year to hold investments in your current 401(k) plan. It's pretty hard to get a decent return with that kind of expense drag. You may consider an asset allocation fund (an "all in one" solution) that automatically rebalances so you aren't juggling this yourself. Finally, confirm if any of your 401(k) plans has after-tax money. The split between pre- and after-tax money often is not shown on 401(k) statements. You need to withdraw after-tax 401(k) money to make sure it isn't comingled with pre-tax money you'll roll over to an IRA. Good luck!

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


October 25, 2013

It is generally a good idea to consolidate accounts so that you can more easily manage them. Reducing expenses is possible and will be a long term benefit but the reduction will depend on how you reinvest. Another option may be to consolidate the older 401ks into your current retirement plan if allowed. Many qualified retirement plans have provisions for loans and hardship distributions that IRAs do not have. My suggestion is to get some advice from someone who knows retirement plans and IRAs and the specifics of your situation. Best of luck.

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


January 17, 2015


$commenter.renderDisplayableName() | 03.09.21 @ 10:23


August 12, 2015

Absolutely. This will make it a lot easier to track and manage your investments. That should be reason enough to consolidate but it will also help to reduce fees (all 401ks have different fees associated with them) and provide you access to many more investment options. This will allow you to create your ideal portfolio for your situation and will also save you money from lower expense ratios. Many times the 401k investment options have higher expenses than other investment options outside of a 401k plan. You also gain a lot more flexibility. e.g. you could do a Roth conversion.

I wrote an article about this a week ago on MoneyTips. You can check it out here.

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


October 27, 2015

I like rolling old 401(k)'s into one IRA, because it's easier to manage and keep track of. There are other reasons you may, may not want to do this, and it's best to be discussed with a seasoned adviser. If you have questions, feel free to reach out to me.

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


December 02, 2015

Yes. It is almost always better to combine them all into one IRA. First off this will give you maximum investment flexibility as most 401(k)s offer limited investment choices and those choices many times have high fees.

If you are young and in a low tax bracket I would consider moving some or all into a ROTH IRA if you can handle the tax consequences. Consult with a tax adviser first so that you know how it would effect your tax situation.

I get this question a lot on my radio show, InvestTalk. If you ever have any questions feel free to call in to the show and ask or contact me directly.

Good luck.

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


March 16, 2016

Do NOT just combine them into an IRA. It may well be worth consolidating them, and I'll note a few reasons below. But there may be good reasons to consider rolling them all into your *current* employer's plan rather than an IRA.

Be aware that much of the financial advisory industry has big incentives to have you put the money into an IRA (and offer to manage or invest it for you) -- and often that's a good idea -- but absolutely not always.

So, aside from the convenience of having it all in one place, consider the following for each former employer:
(a) does the plan have good investment options?
(b) does the plan charge expenses (either high-expense investments or other fees that hit your accounts such as custodial or maintenance fees)?
(c) is the custodian easy to deal with (i.e., do they have a good website, can you easily rebalance your portfolio, etc)?
(d) is the former employer easy to deal with (i.e., is it a large stable company you can easily contact, etc)?

If your current employer's p[an is good -- no fees, good investment options -- consider rolling all that money from the former employers plans into your current employer's plan rather than into an IRA.

If your current employer's plan is not great -- and the former employer plans are also not great -- then consider rolling it into an IRA (and I recommend keeping all such rollover money in a separate IRA, distinct from any IRA account to which you made direct contributions -- to facilitate possibly rolling it over again into another employer plan in the future).

So why prefer an employer plan over an IRA? (a) it preserves options to do lower-cost Roth conversions if you are making non-deductible IRA contributions; (b) employer plans have better creditor protections under federal law; (c) some employer plans give you access to great investment options you may not easily get with an IRA; and (d) you can always roll into an IRA in the future, so there's generally little downside; (Oh, and (e) earlier penalty-free distributions; and possibly (f) if you're still employed, no RMDs until you retire -- this last one is huge if you're approaching 70 and still working!)

The key is - all that is only worth it if the 401k is a good or great one. I see lots of those -- but I also regularly see awful ones with terrible investment options and high fees.

Why prefer an IRA over a 401k? (a) lots more investment options; (b) directly dealing with the custodian and not having to deal with an employer or former employer; (c) you can work with an advisor of your choosing if you like; Also it makes it a lot easier to administer in general.

I highly recommend consulting with an *hourly* fee-only financial planner. You may pay a few hundred bucks for an hour or two of his time. Do *not* ask your bank (they'll tell you to roll it into an IRA there) - and if you consult a fee-only planner who gets compensated as a percentage of assets under management, well, he only gets paid if you have assets under his management.

(Disclosure -- I do both hourly work *and* asset management work.)

$commenter.renderDisplayableName() | 03.09.21 @ 10:23


March 17, 2016

Why not roll them into a self directed IRA or Roth IRA? If you are not comfortable in managing these yourself, We can help you with that. You can also set them up as self directed passive investments. We can actively manage these or you can do it yourself.

Some questions for you?
1) where are you financially?
2) where do you need to be financially?

To answer either, you need to know your number. Together we can help determine this number which is how long your income will exceed your expenses. No obligation.

It's not what you make, it's what you keep that determines your lifestyle.

$commenter.renderDisplayableName() | 03.09.21 @ 10:23