13 Jun Settle an argument: Should we consolidate accounts?

Q. Can you settle an argument between me and my spouse? I have always moved my 401(k) plans into an IRA just to keep paperwork simple so I don’t have to watch too many accounts. My wife has three 401(k) plans from old jobs and she doesn’t want to move them because she said she likes how they have performed. I think over time her expenses will be lower if she consolidated. What do you think?
— Trying over here

A. There are a number of reasons why consolidating old retirement accounts such as 401(k)s, 403(b) and 457s can make sense.

Let’s walk through a few of them in the hopes that your wife might see the benefits.

Less is often more when it comes to where your accounts reside, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

Retirement accounts from former employers can get lost or forgotten especially as firms merge or are taken over, she said, noting a 2023 report from Capitalize. It said there are about 29 million inactive accounts with assets of at least $1.7 trillion.

“Consolidating retirement accounts under one umbrella makes it easier to manage investment allocations and to take required distributions when the time comes,” she said. “Additionally, it may make it easier on your beneficiaries, who may be unaware of old accounts, or how to access them, in the event of your passing.”

Ordinarily there are fees charged to the account holder of an employer-sponsored retirement plan, Mott said. These fees cover back office and administrative overhead and are over and above the cost of the investments in the plan.

“Fees for 401(k) can range between 0.5% and 2% or even more and are often based on the size of the plan, how many people are participating and who is providing the plan,” she said, noting the average annual fee charged by most funds is 1%, according to the Center for American Progress.

As an account grows over time, so do the fees that are charged. In an IRA, there are no fees for overhead, only expense ratios for the investments that are owned, she said.

If your wife feels that her accounts have performed well, she will very likely be able to duplicate the investments in the 401(k) at a custodian that holds an IRA, Mott said.

“This would be especially true if she has Target Date investments or holds a variety of stock and bond index funds,” she said. “Depending on the funds being used, some may rollover directly to a new IRA with no need to make any changes.”

There are instances however where a particular type of investment cannot be purchased within an IRA and an alternative would need to be used. These funds include stable value and guaranteed income offerings that are specific to some employee plan platforms, Mott said.

“It is important to be sure that only pre-tax contributions roll into a new IRA if the separate 401(k)s are merged,” she said. “Any after-tax contributions would need to transferred to a Roth IRA. Please be sure to speak with the 401(k) custodians to understand the specifics of how to execute the rollover and if there are any restrictions on their end.”

Good luck with the debate and let us know what happens.

Email your questions to Ask@NJMoneyHelp.com.

This story was originally published in June 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.