Dear Penny Hoarder;

I have 3 separate 401K accounts from 2 different employers and a personal 401K & Roth on my own. Should I combine these to one account or leave them as they are?


I also have multiple accounts. I am no expert, but your required distributions in retirement would be based on the account value at the time of distribution so it might not make a difference whether or not they are combined; it might (depending on the investments in each account and the value at the time of distribution) be the same amount of income either way. Diversifying (keeping all of the individual accounts) has pros and cons in my opinion. Pros: As the years go by you will have a better handle on which firms you prefer doing business with and have the best customer service and the most user friendly interfaces. After you figure this out you may decide you would like to combine them but leaving them as is gives you a better education on what services are out there and what they are like to work with. Also in the unlikely event that one of them has “trouble” in the future, you won’t have all of your eggs in one basket. Cons: Having multiple accounts is a lot more to keep track of both at tax time and just log in time in general, and each website has it’s own way of doing things so if simplicity and streamlining is your goal, then certainly combine them now. You will not be able to combine your ROTH with the other accounts though, due to the deferred taxes on the 401K’s the ROTH (which is already tax pre-paid) you will have to leave that as a separate account. But you are under no obligation to keep that ROTH at the current institution; it could be rolled into a new account at a new institution of your choice. There may be tax implications for doing this though, especially if you are unable to buy the same securities at the new institution that you currently hold. A really simple, old-fashioned and effective way to help you make the decisions is the old “Franklin T Square” (you’ll have to google it for an explanation) but I use these often when trying to make big decisions when the answer is not clear. I gather the information for both sides of the T for a while, study it for a while, and the answers either become quite clear or raise new questions to reasearch. Good luck and let us know what you decided!

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Ask Penny. Something similar happened to me, @derek.brammer. I combined them into one IRA.

We have separate IRAs and 401k accounts. We are not combining them. ERISA protects employer sponsored IRAs and 401ks from creditors except for IRS if they remain under the employer plan.

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Veronika is right

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