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Five Reasons to Consolidate Your IRAs - When it makes sense to simplify investments

If you are like many long-time retirement savers, you may have several IRAs you  started up in years gone by. This usually results in a flood of financial statements in your mailbox. But you can cut down on the paperwork—as well as simplify your life—by consolidating your IRAs in one place.
Caution: Before we go any further, remember that all IRAs are not created equal. For instance, you cannot mix and match traditional IRAs with Roth IRAs.
A traditional IRA may include tax-deductible contributions from the time when you were eligible for IRA deductions. The distributions from these IRAs are subject to tax at ordinary income rates. In contrast, contributions to a Roth IRA are never tax-deductible, but future distributions may be completely tax-free if the Roth IRA has been in existence for at least five years.
Similarly, you may forfeit tax benefits if you combine the funds in an IRA you have inherited with your own IRAs. Be aware of these critical differences.
Nevertheless, assuming you have several traditional IRAs that may be combined without any adverse tax consequences, consider these five reasons for consolidation.
1. It is difficult to coordinate your retirement planning strategies if you are spread out all over the place. This enables you to focus on your goals—for example, taking a more conservative approach—by taking your current circumstances into account.
2. One or more of your IRAs may be providing a better return on investment than the others. By moving assets into a single IRA, you can eliminate the IRAs that have not performed as well.
3. Administrative costs can erode your nest egg. Thus, you may save money in fees overall by consolidating IRA assets.
4. It is easier to keep track of your investments. Instead of multiple statements, you will receive just one statement covering all of your IRA investments.
5. Required distributions from your IRAs must begin by the year after the year in which you turn 70½. The amounts of the required distributions are based on all of your IRAs. Therefore, it will be easier to calculate the required distributions.
Of course, you may not want to consolidate your IRAs in order to maintain greater diversity or for personal preferences. Discuss your options with an experienced adviser.

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