Consolidating multiple iras

It is not uncommon to wind up with multiple 401(k)s after switching jobs a few times during the course of a career.Companies usually allow employees to leave their money in the plans even after they leave the company, although non-employees are not allowed to make contributions.But many financial advisers say it could be better to combine old company retirement accounts into a single 401(k) offered by a current employer or roll all of the old accounts into an IRA.

"Someone could have five or six different 401(k) accounts invested in different ways that do not work together for their long-term plans.

"It comes down to asset allocation, which is the mix of stocks and bonds in a person's investment portfolio," she said. Department of Labor's Bureau of Labor Statistics has found that the average person born in the latter years of the baby boom (1957-1964) held 11.3 jobs from age 18 to age 46.

"An individual with multiple 401(k)s with different companies may wind up at age 65 without the investment mix that they really need." At a time when workers are becoming responsible for funding their own retirements through company 401(k)s or IRAs, they also find themselves more vulnerable than ever before to being downsized, outsourced or forced to take early retirement -- all of which may cause them to change jobs frequently. Although job duration tends to be longer the older a worker is when starting the job, the federal government found the baby boomers in the national longitudinal study continued to have large numbers of short-term jobs even at middle age.

Among jobs started by 40- to 46-year-olds, 33 percent ended in less than a year and 69 percent ended in less than 5 years.

Chris Chaney, vice president of Green Tree-based Fort Pitt Capital Group, said he also has found that high achievers can be so focused on their careers that when they are given a new employment opportunity with a different company, they may forget to rollover the retirement assets they worked so hard to build with their previous employer.

"We often find that these people have assets in a number of different accounts, sometimes with a number of different firms," Mr. "This can make managing their retirement portfolio difficult, regardless of how experienced they are as investors.

"The result can be a hodge-podge of holdings strewn across a bunch of accounts, often with unsuitable investments that reflect past trends or concerns," he said.

"Ironically, this is almost exactly opposite to the careful, considered approach that makes them successful in their professional endeavors.

"Worse, they end up neglecting the wealth they are working to build, the very thing they are counting on to support them when they retire." Most financial advisers recommend consolidating scattered 401(k)s not only to manage them better, but also to establish a strategy based on their current needs and goals and the market today, rather than one that reflects their past views or the limited options they might have for investing in an old company 401(k) plan.

Robert Fragasso, chairman and CEO of Fragasso Financial Advisors, Downtown, said the fees charged by an IRA are likely to be lower than the management fees charged to accounts in a company 401(k) plan.

An IRA will probably have more investment options than a company 401(k), and having one IRA allows the investor to focus on the portfolio's allocation, rather than have multiple uncoordinated accounts.

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