Help for participants nearing retirement

There are several benefits to combining retirement accounts from multiple employers. It will make their financial life less complicated by having all their accounts in one place: fewer statements, fewer investments to keep track of and usually fewer fees. However, before consolidating, you should carefully consider the available investment options under each plan, the fees and expenses associated with each plan, whether the employer pays for some or all of the plan’s administrative expenses and the different levels of services available under the plans. Combining accounts is easy to do, but there may be tax consequences if they don’t go about it correctly. 

It’s important for plan participants to understand that taking income in retirement (distribution) requires a different investment strategy than saving for retirement (accumulation). They should be aware of the rules and regulations surrounding distributions.
 

The IRS generally requires that participants annually withdraw the tax-deferred money that they have accumulated in non-Roth retirement accounts once they turn age 72. Required minimum distributions (RMDs), which are based on life expectancies and account balances, are designed to help gradually pay the taxes owed on those assets. The rules differ depending on the investor’s mix of different retirement savings accounts.
 

For employer-sponsored retirement plans, participants have several options: cash out with a lump-sum distribution, leave savings in the plan, move savings into a rollover IRA and, if they should come out of retirement and rejoin the workforce, move savings to a new employer’s plan. The options available may depend on the terms of your retirement plan(s).