If job changers had an 401k account at just half of those positions, it would represent a significant money management challenge: multiple redundant investment portfolios and a mountain of account statements and investment documentation to sort through. Bureau of Labor Statistics estimates that Americans change jobs about 10 times between the ages of 18 and 42.One flexible solution to simplify the task is to consolidate assets under a single account umbrella via a 401k rollover to IRA.Offered by many financial institutions, the rollover IRA can help you streamline your investments into a unified asset allocation plan.With a direct rollover, the financial institution that runs your former employer’s retirement plan simply transfers the money straight into your new rollover IRA.There are no taxes, penalties or deadlines for you to worry about.With an indirect rollover, you personally receive money from your old plan and assume responsibility for depositing that money from the 401k into a rollover IRA.
While there are many advantages to consolidated IRA rollovers, there are some potential drawbacks to keep in mind.It can also help reduce unnecessary risk and better align your savings with your goals.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: 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.Ameriprise Financial Services Inc., and its affiliates do not offer tax or legal advice.Consumers should consult with their tax advisor or attorney regarding their specific situation.In addition, there are many exceptions and limitations that may apply to your situation.Before making any decisions, consider talking to a financial advisor who has experience helping people structure retirement plans.Consolidating your accounts can 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.Also, with a traditional IRA rollover, you must begin taking distributions by April 1 of the year after you reach 70½ whether or not you continue working, but employer-sponsored plans do not require distributions if you continue working past that age.(Roth IRAs do not require the owner to take distributions during his or her lifetime.) Remember, the laws governing retirement assets and taxation are complex.