303 | Should You Consolidate Retirement Accounts? (401k & IRA Explained)

[00:00:44] Hilary Hendershott: Today, I want to talk about a question that comes up all the time: Should I consolidate my retirement accounts? So, let’s start with something important, and that is, how did you end up with so many accounts in the first place? If you have retirement savings spread across multiple 401(k)s or 403(b)s or even brokerage accounts, that does not mean you’ve done something wrong. It usually means you’ve had a full and dynamic career.

[00:01:12] Most successful professionals change jobs multiple times, and each role comes with its own 401(k). Add in an IRA you opened years ago, maybe a rollover, possibly you even have an inherited account. Over time, you look up and realize your retirement savings are sitting in four, five, maybe six or more different places. It happened to me. That’s not unusual.

[00:01:35] The real question is whether keeping them separate still makes sense for you. The primary benefit of consolidating retirement accounts is clarity. When your assets are scattered, it’s harder to see your full picture. You’re logging into multiple platforms, doing the math in your head. You’re receiving multiple statements.

[00:01:55] Your investments might be unintentionally duplicated or misaligned. When accounts are consolidated thoughtfully, you get a clearer view of your overall allocation, a more coordinated investment strategy, less administrative friction. And that simplicity can make a real difference because financial confidence often comes from being able to see what you actually have.

[00:02:18] There can also be cost advantages. Different plans have different fee structures. Some workplace plans carry administrative fees that aren’t always obvious. Some older IRAs may hold higher cost investments that you haven’t reviewed in years. Also, employer-sponsored 401(k)s naturally are going to have a finite list of investments you can choose from.

[00:02:41] So, aggregating your accounts at a custodian where you have more choice about what you can invest in can actually increase your returns. Increasing the rate of growth inside your account is yet another way aggregating can benefit you financially. When you bring accounts into one coordinated structure, you can do several things. You can evaluate expense ratios more clearly. You can remove redundant fees, and you can ensure your investments are aligned with your current strategy.

[00:03:10] And later in life, fewer accounts also means fewer required minimum distribution calculations, fewer beneficiary forms to update, and fewer institutions involved in estate planning. It reduces complexity both now and later, and this is where it gets more nuanced. Not every 401(k) should automatically be rolled in an own IRA. Some employer plans offer excellent institutional pricing that you may not replicate elsewhere. If you’re considering early retirement, there are timing rules that matter.

[00:03:41] Certain workplace plans allow penalty-free access at specific ages, and that access would disappear if those funds were rolled into an IRA. If your current 401(k) allows loans, rolling assets out would eliminate that feature. Now, I don’t generally recommend borrowing from retirement accounts, but the option itself can be relevant.

[00:04:03] So, consolidation isn’t about tidying up for the sake of tidying up. It really is about understanding what you might be giving up. Before consolidating, I always ask, “How good is the plan you’re leaving?” Sometimes an old 401(k) is limited and expensive. Sometimes it’s quite strong. The answer to that question determines your strategy.

[00:04:23] Convenience alone isn’t usually a sufficient reason to move money. Really, it’s the quality of the investment options, the cost structure, and the flexibility. Those all matter. If consolidation makes sense, there are several thoughtful approaches. You might roll old workplace plans into a traditional IRA for broader flexibility. That’s typically what we do.

[00:04:45] You might consolidate into your current employer’s 401(k) to preserve certain plan benefits. Some people consolidate by tax type, so traditional assets together, Roth assets together, et cetera, which simplifies management while maintaining tax clarity. Others choose to house accounts at one institution without fully merging them. That preserves strategic separation, but it reduces operational complexity.

[00:05:11] There really isn’t one correct answer. There’s only the right plan for you, given the set of options you now have. When someone asks me, “Should I consolidate?” My first question back is, “Well, what problem are we trying to solve? Is it cost? Is it disorganization? Is it lack of a cohesive strategy? Is it access to great investments? Or are we just trying to simplify complexity?”

[00:05:36] Usually, consolidation is the right answer, and it’s what we pursue with clients. Sometimes a coordinated review without moving anything creates the clarity you were looking for. If you have multiple retirement accounts, you’re definitely not behind. You might actually be ahead.

[00:05:52] And if you’re still watching this video, you’re probably at a decision point. So, like I said, usually, consolidation is the best plan and what we pursue with clients, but it’s not always, and I hope this video has given you good food for thought. For decisions like these, there are usually plenty of options that you can choose, many paths you can take. But when it comes to your finances, almost no option beats operating with a well-thought-out plan.

[00:06:19] If you’re thinking about your next financial chapter and want a partner who looks at the full picture, not just your investments, we’d love to connect. We’re a fee-only fiduciary team focused on after-tax outcomes and long-term planning, helping our clients keep more of what they earn so their money can support the life they’re building. If that sounds like the kind of guidance you’re looking for, you can schedule a complimentary conversation with one of my lead advisors by visiting HendershottWealth.com/contact to see if our approach is the right fit for you.