Pros and Cons of Consolidating Your Retirement Assets

An old couple enjoying a cup of coffeeAs you experience major life changes, such as changing jobs, you’re likely to end up having retirement assets with different investment companies. That may make managing your money more difficult. You can simplify your financial life by consolidating your assets in one place, but depending on your age, employment status, and type of retirement products, you may be better off keeping some of your assets where they are.

Keep in mind these pros and cons:

Pros

Cut Costs: Some investment companies may charge you fees to keep accounts open. By pulling your assets together, you may reduce or even eliminate such fees. Also, some companies charge higher annual management expenses than others. Consolidating in low-cost investments can help you apply extra dollars toward your savings goals. For example, if you invest $10,000 over 30 years, earning 6% annually, with annual expenses of 1.5%, you end up with $36,497. But if you’re in a low-cost investment, where the annual expenses are 0.5%, you end up with $49,416 — a difference of nearly $13,000.*

Improve your investment mix: When your assets are scattered among various accounts, you’ll likely spend a lot of time determining how well different asset classes are allocated or diversified. Having your assets in one place makes it easier to:

  • Properly set up your investment mix to balance risk and reward as you save to help meet your financial goals.
  • Rebalance, when needed, if your asset allocation drifts as your assets perform differently, or if you experience a major change in your financial situation.

Better coordinate retirement income: It can sometimes be difficult to establish an income strategy if you must withdraw money from multiple providers, particularly when you’re nearing age 70½ and need to make required minimum withdrawals. Consolidation can make income planning much easier.

Save time: You can more easily track your entire portfolio with one company. You’ll receive fewer statements, which means that evaluating and managing your financial life becomes simpler. It also becomes easier to use one website to quickly size up your investment progress and make any needed adjustments. The result is that you can accomplish more with less effort.

Cons

Watch out for withdrawal penalties. Be sure you understand all of the costs involved when consolidating. For example, some IRAs, tax-deferred plan contracts and mutual funds have withdrawal penalties and back-end loads that may deplete your assets.

Avoid Moving Pre-1987 403(b) Funds. If you have pre-1987 403(b) assets, you’re likely better off not moving your money. Since pre-1987 403(b) accumulations are “grandfathered” under retirement plan laws, you’re not required to begin taking withdrawals until age 75, compared with the standard requirement of taking distributions after age 70 ½. If, however, you move any grandfathered money into an IRA, the regular IRA withdrawal rules would then apply. The longer you’re able to defer taking distribution, the more opportunity you have to increase tax-deferred earnings.

Need Financial Help?

Phone ringing Call us 800-842-2888

Phone with arrowSchedule a callback

Circular people graphicAttend a meeting or seminar 

Experiencing a Life Event?

Changing jobs? You may be moving on, but your money has a home with TIAA-CREF. Learn more

Tools & Calculators

See all 

Financial Essentials
Workshops & Webinars

  • Money at Work 1: Foundations of Investing
  • Money at Work 2: Sharpening Investing Skills

See all 

Everything in one place

There are benefits to an IRA rollover.

Learn more

C5958