Could you benefit from consolidating your retirement assets?

Key Points

  • Rolling over assets into an IRA has pros and cons.
  • Consolidating retirement accounts may help simplify your finances.
  • Integrating your retirement accounts with a financial plan can help you track your goals for retirement.
  • Seeing all your savings in one place can help you monitor investments.
  • Consolidation may help you diversify your investments.

Many Americans own two or more 401(k) or other retirement accounts. If you are one of these people, consolidating your accounts may help you save time and may provide a more comprehensive view of your financial situation.

Consolidation may save you time and money

When you have multiple accounts, it can be more difficult to understand how much money you have and where it is. Over time, you may even lose track of some older accounts. Consolidating your accounts may save time by reducing the number of accounts you have and need to track. It also may allow your financial advisor to provide you with broader services and easily integrate your retirement accounts with a financial plan.

Consolidation can help you diversify your assets

Having money in multiple accounts with different funds does not necessarily make your portfolio more diversified. In fact, it may make it harder to see your holdings, and may actually conceal very similar investments in various accounts.

Consolidation may make it easier to allocate assets according to your investment strategy. Seeing your entire portfolio in one place could reveal when you are too concentrated in one area of the market and make it easier to adjust and fix these imbalances. It may also help reduce unnecessary risk and better align your savings with your goals.

Learn about your options for your retirement plan assets

If you have savings in an employer-sponsored retirement plan like a pension, 401(k) or 403(b) plan, you have an important decision to make when you change jobs, retire or otherwise become eligible to withdraw money from the plan, including:

  • Leaving it in your former employer's plan
  • Transferring it to your new employer's plan, if available and allowed by that plan
  • Rolling it into an individual retirement account (IRA)

Comparison of retirement plan options

This chart compares some basic features of employer-sponsored plans and the Ameriprise® IRA. For a more complete comparison, ask your advisor to review the Leave It or Roll It?® brochures with you. Your Ameriprise financial advisor can help provide the information you need to decide the most appropriate choice for some or all of your retirement savings.

  Defined contribution plan Defined benefit plan Ameriprise® IRA
Control of custodian/service providers 
  • Plan fiduciary chooses custodian, record keeper and other service providers
  • Plan fiduciary chooses custodian, record keeper and other service providers
  • Investor chooses custodian and has full control and access to assets
Investment options
  • Plan fiduciary typically narrows investment universe to a selected menu of investment options from which investor may select
  • Employer guarantees payments and bears investment risk and directs investments
  • Access to a wide range of investment products from which investor may select
Investment services
  • May offer investor access to professional investment advice or education
  • Not applicable
  • Investor chooses desired level of advice and financial planning services
Distribution flexibility
  • Distribution options depend on the plan’s terms and may be limited as to frequency; some plans only permit lump sum distributions; may have limited ability to control which investments are sold
  • Distribution options typically include single life, joint and survivor and other annuity options. May be able to opt for other periodic payments and one-time lump sum payments (subject to plan terms)
  • Investor has control of timing, frequency of payments, and which investments are sold to fulfill distributions

Beneficiary planning

and options
  • May select spousal beneficiary
  • Some plans allow for other designations (spousal consent required)
  • May limit the payout options for your non-spouse beneficiary and your ability to name multiple or contingent beneficiaries
  • May select spousal beneficiary
  • Some plans allow for other designations (spousal consent required)
  • Flexible options, including multiple and contingent designations and maximum payout options for non-spouse beneficiaries

10% early withdrawal

penalty
  • A penalty tax will apply unless you meet certain exceptions
  • A penalty tax will apply unless you meet certain exceptions
  • A penalty tax will apply unless you meet certain exceptions
Roth conversions/direct rollovers
  • May be eligible for in-plan Roth conversion depending on the plan’s terms
  • May convert eligible rollover distributions from the plan to a Roth IRA
  • May convert eligible rollover distributions from the plan to a Roth IRA
  • May convert from an employer-sponsored plan or an IRA to a Roth IRA
  • Inherited IRAs not eligible for conversion to Roth IRAs
Creditor protection
  • Assets are protected from creditors
  • Assets are protected from creditors
  • Federal bankruptcy protection applies to rollover amounts
  • Protection outside of federal bankruptcy law varies by state
Employer securities and net unrealized appreciation (NUA)
  • Tax on the appreciation of an in-kind distribution of employer stock is deferred until you sell the shares and will be at the capital gains rate
  • Not applicable
  • NUA tax treatment is lost for employer stock that is rolled over to an IRA
Federal withholding rules
  • Taxable distributions are generally subject to a mandatory 20% federal withholding
  • Taxable distributions are generally subject to a 20% mandatory federal withholding
  • Generally subject to an optional 10% federal withholding
Loans
  • May permit loans, but typically only for active employees
  • Not applicable
  • Loans are not allowed

Required minimum

distributions for plan participants and IRA owners (Different rules apply to inherited amounts)
  • Generally must be taken by April 1 of the year after you reach age 73
  • If you are not a 5% owner and the plan provides, you may wait until after retirement
  • Not applicable to designated Roth accounts beginning in 2024
  • Generally must be taken by April 1 of the year after you reach age 73
  • If you are not a 5% owner and the plan provides, you may wait until after retirement
  • Must be taken by April 1 of the year after you reach age 73, regardless of whether you continue to work
  • Not applicable to Roth IRAs
  • Qualified charitable distributions are available beginning at age 70 1/2
Investment expenses
  • Some plans provide access to institutional pricing (based on total plan assets, not just your account), which may result in lower investment expenses
  • Typically, no sales charges or commissions apply unless you have a brokerage account in the plan
  • Because benefits are guaranteed, fees do not generally affect your stated benefits
  • Your investment expenses depend on your particular circumstances and your arrangements with Ameriprise
  • If you open a brokerage account, you may be charged a transaction fee when trading within your account
  • If you invest through an advisory account, sales charges and commissions are generally included in the advisory fee
  • Your costs and the compensation paid to your Ameriprise financial advisor will vary based on the products and services you choose

Account, administrative and other fees
  • Your employer may offer access to professional investment advice at the employer’s expense, or at an additional charge to your account
  • Employers may charge reasonable fees to former workers and their beneficiaries who remain in the plan
  • Plan fees typically include plan administrative fees (e.g., recordkeeping, compliance, trustee) and fees for services such as access to a customer service representative
  • Because benefits are guaranteed, fees do not generally affect your stated benefits
  • An annual IRA custodial fee may apply but will be waived if you qualify for Ameriprise Achiever Circle Elite status

Determining which accounts to consolidate and handling retirement plan distributions can be complex and requires careful thought and additional advice from your tax and legal advisors. An Ameriprise financial advisor can help evaluate your own unique situation and provide education and guidance so you can determine if consolidation is the right thing to do.

RELATED INFORMATION

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At Ameriprise, the financial advice we give each of our clients is personalized, based on your goals and no one else's. 

If you know someone who could benefit from a conversation, please refer me.

Background and qualification information is available at FINRA's BrokerCheck website.

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These materials are intended to be educational in nature and do not establish a fiduciary relationship. Further, the information contained in this document should not be construed as an investment opinion or recommendation by Ameriprise Financial Services., Inc. to buy or sell securities.
Be sure you understand the potential benefits and risks of an IRA rollover or transfer before implementing. As with any decision that has tax implications, you should consult with your tax adviser prior to implementing an IRA rollover or transfer.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Diversification is not a guarantee of overall portfolio profit or protection against loss.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.
Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC
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