Stop Juggling That Handful of 401(k)s and IRAs

Similarly, there are tax benefits. Owners can take advantage of so-called early, hardship withdrawals, beginning at 59.5 years for a number of reasons, without penalty.

And if you lose or quit your job between 55 and 59.5 years, you can take an early withdrawal without the usual 10 percent penalty — although you'll still have to pay income tax, on an ordinary-income basis, on the withdrawn sum.

There’s one other tax advantage, but it is valuable to a smaller group of people.

Company stock purchased under a 401(k) plan and then rolled over into an IRA is no longer eligible for tax breaks, says financial advisor Brett.

On an investment basis, there are also reasons why the average 401(k) plan participant might want to keep the funds where they are, say experts, but it may depend on the size of your plan.

“There’s a strong argument, that if you like the underlying investment options, then you keep them,” says Meis of 401khelpcenter.com.

This is more likely to be the case at larger companies. Their plans are bigger and typically have lower fees to cover the administrative costs and can sometimes negotiate better terms with the companies managing the investment funds.

"Most larger plans generate enough revenue to always cover the cost of the record-keeping fees of the plan administrators," says Brent Glading, managing director of the GladingGroup, which helps companies with their plans.

(New federal rules on fee disclosures took effect July 1 and will be visible in third-quarter statements.)

Large-company plans also have a more than adequate variety of funds for their employees to pick from.

The investment choices of larger companies have also been pre-screened by the employer, reducing risk.

“The investment choices definitely are vetted; they have a fiduciary responsibility to make the best choices in terms of the participant,” says Oakley of the NIRS. “If you are in a plan that is a good plan, and you have low fees and the employer is OK with you staying it that plan, then sometimes it is the best thing to do.”

That may not be the case with smaller companies, say experts.

“Some employers don’t want to spend the time on it and just want somebody to come in and do it,” says Mies. “In such cases, it’s “more than likely those options have not been vetted.”

In the end, whether it’s an IRA or 401(k) may not matter, as much as paying attention and keeping track of your money. In most cases, experts say, consolidation is the easiest way to achieve that.

“If you have a significant amount of assets you pay attention,” says Wray. “When there’s more than $20,000 in one place there seems to be a higher degree of attention; if your money is relatively small amounts and scattered about, its human nature to not pay attention.”

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