Simplify numerous IRA - 401ks

The average person changes jobs eight times during the course of a 30-year career. Subsequently, many workers leave behind a trail of employer-sponsored retirement plans scattered among various providers. The result may be a load of unnecessary paperwork and a logistical headache when it comes to asset allocation and taking mandatory retirement plan distributions.

There is, however, a way to consolidate all that paperwork and still maintain the tax-deferred status of your retirement savings. It’s called an IRA direct rollover.

Advantages of combining assets into one IRA - 401k

Rolling your retirement assets into a single IRA means fewer monthly or quarterly statements, and it may mean less paperwork at tax time. An IRA rollover can also give you greater investment flexibility and make assets easier to manage. Whether you are rebalancing your portfolio or designating beneficiaries, dealing with a single financial institution can simplify the process and may help reduce fees and expenses. Plus, you can invest with the institution of your choice and often select from a broader range of investment options.

Growing your IRA - 401k

Over time, tax-deferred retirement savings can grow to an attractive sum. But many people become tempted to cash out when they change jobs or enter retirement. Doing so, however, can be costly. Depending on your age and tax bracket, you could lose up to half of your assets to taxes and early withdrawal penalties. An IRA rollover allows you to keep assets growing tax deferred until you retire, at which time you can withdraw funds as needed and pay taxes only on withdrawals.

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A direct trustee-to-trustee transfer can help eliminate any withholding, taxes, and penalties during the actual rollover process. If a trustee-to-trustee transfer is not possible, ask that a check in the amount of your balance be made out to your new IRA custodian for deposit into your account. If the check is issued in your name, a mandatory 20 percent of the account’s value will be withheld for federal income taxes — even if you plan to deposit the entire sum in the new IRA before the 60-day deadline. In order to eliminate paying those taxes, plus additional early withdrawal penalties, you will have to come up with the 20 percent from other funds and deposit the entire distribution in the new IRA before the deadline.

Your financial situation can become increasingly complex with age. If you’re looking for a way to streamline your retirement assets, an IRA rollover may be right for you.