When it comes to retirement planning, it’s easy to focus on growing your savings, but what often gets overlooked is where those savings are held. Over time, it’s not uncommon to accumulate multiple accounts: a 401(k) from a former job, an IRA you opened years ago, maybe even a brokerage account or two. While having several retirement accounts might seem harmless—or even strategic—it can actually work against you.
Let’s explore why consolidating your retirement assets can be a smart move and how scattered accounts may cost you more than you think.
The Downsides of Scattered Accounts
Overlapping Investments and Inefficiency
With retirement accounts spread across multiple custodians, getting a clear picture of your total investment mix becomes harder. You might unknowingly be overexposed to one sector, under-diversified, or paying for funds with higher fees than necessary. Consolidating allows for a more holistic asset allocation strategy that aligns with your risk tolerance, time horizon, and retirement goals.
Missed Rebalancing Opportunities
When accounts are scattered, rebalancing your portfolio becomes more complicated. Coordinating adjustments across multiple platforms is more complex, which can lead to unintentional risk drift over time. A unified investment strategy simplifies this process and helps ensure your portfolio stays aligned with your retirement timeline.
Administrative Headaches
Multiple accounts mean multiple logins, multiple statements, and multiple sets of paperwork to manage. This fragmentation can be particularly burdensome during tax season or when tracking down required minimum distributions (RMDs) in retirement. Consolidation streamlines your recordkeeping and reduces the chance of costly administrative errors.
Higher Fees
Some accounts carry account maintenance fees, fund-level expense ratios, or transaction costs that can quietly erode your returns. By consolidating, you may be able to reduce or eliminate redundant fees and take advantage of lower-cost investment options available through fewer, larger accounts.
Difficulty Tracking Required Minimum Distributions (RMDs)
Once you reach age 73 (as of 2025), you must take RMDs from certain retirement accounts. Failing to do so can result in steep tax penalties. With assets spread across multiple custodians, coordinating and calculating your total RMD can get confusing. Consolidating simplifies the process and helps ensure you don’t miss a withdrawal.
The Benefits of Consolidation
Simplified Oversight
When your assets are housed in fewer accounts, tracking your progress toward retirement goals becomes much easier. You’re not juggling multiple statements or trying to compare investment returns across different platforms. A consolidated view lets you make more informed decisions about asset allocation, risk exposure, and performance.
Better Coordination with Your Advisor
Your financial advisor can deliver more personalized and effective advice when they have visibility into your entire retirement portfolio. Consolidation allows for better tax planning, income strategies, and investment alignment across all accounts. For example, by consolidating investments into two accounts—one pre-tax and one Roth—your advisor will be better able to implement a strategic withdrawal strategy to reduce your tax burden in retirement.
Improved Estate Planning
From an estate planning perspective, fewer retirement accounts mean less paperwork and less confusion for your heirs or executor. It ensures a smoother transfer of assets and helps avoid delays caused by tracking down forgotten accounts or outdated beneficiary designations.
When Does Consolidation Make Sense?
While not everyone needs to consolidate every account, it’s worth considering if you find yourself in one of the following situations:
You’ve changed jobs and still have old 401(k) plans sitting with previous employers
It’s easy to leave a 401(k) behind when moving on to a new job, but those accounts can become difficult to track and manage over time. Fees may be higher, investment options limited, and you may miss the chance to integrate it into your current strategy.
Recommended process to consolidate 401(k) plans:
- Contact former plan administrators to verify account balances, fees, and available options.
- Open a rollover IRA or transfer the funds to your new employer’s 401(k).
- Ensure the rollover is done as a direct transfer to avoid unnecessary taxes or penalties.
- Review and align your investment allocation with your broader retirement plan.
You’ve opened multiple IRAs over the years and don’t actively manage them
It’s not uncommon to open new IRAs at different points in life—perhaps one through a bank, another through an advisor, or one to try a different platform. However, these accounts can become redundant or misaligned with your current investment strategy if left unchecked.
Recommended process to consolidate multiple IRA accounts:
- List all IRAs, account numbers, custodians, and investment holdings.
- Compare fees, fund performance, and service quality.
- Choose a preferred custodian and initiate a trustee-to-trustee transfer for the others.
- Consolidate based on which institution offers the best tools, pricing, and support for your needs.
You’re nearing retirement and want a more streamlined income and distribution strategy
As retirement approaches, the focus shifts from accumulation to income generation. Multiple accounts with different rules and withdrawal requirements can complicate your income plan and increase the risk of errors.
Recommended process to streamline distributions:
- Inventory all retirement accounts (401(k), IRA, Roth IRA, etc.).
- Evaluate tax implications of withdrawals from each account type.
- Consider consolidating pre-tax accounts (like traditional IRAs and 401(k)s) into one IRA to simplify RMD tracking.
- Keep Roth IRAs separate if tax-free growth is a strategic part of your long-term plan, but consolidate Roths where appropriate to reduce account sprawl.
You’re working with a financial advisor and want to build a comprehensive plan
Advisors provide the most value when they can see your complete financial picture. Scattered accounts make coordinating investment decisions, tax strategies, and estate planning harder.
Recommended process to build a comprehensive plan:
- Work with your advisor to review account types, holdings, and historical performance.
- Choose a primary custodian based on cost, access, and integration with your advisor’s platform.
- Transfer accounts using direct rollovers or trustee-to-trustee transfers.
- Ensure the consolidation aligns with your investment and broader goals.
Final Thoughts: Bring Your Retirement Strategy into Focus
Consolidating your retirement assets can have both logistical and financial advantages. But before you move money, consider the implications for fees, investment options, and any potential tax consequences.
At Northern Way, we believe that clarity leads to confidence. Consolidating your retirement savings can eliminate unnecessary complexity, reduce costs, and bring your complete financial picture into sharper focus. It’s a small step that can make a big difference in your long-term planning, giving you the control and peace of mind you deserve.
If you’re wondering whether consolidation is right for you, our team is here to help you assess your options and create a retirement strategy tailored to your unique goals.
