IRA Consolidating

By Peter Sweetser

It’s important to understand the advantages and potential disadvantages before you consolidate. To begin with, there are two types of IRAs — Traditional and Roth. Traditional includes Rollover and Spousal IRAs which can be consolidated (rolled over), even from different companies, into one FAM Funds Traditional IRA. Roth IRAs may also be combined including Roth 401(k)s.

Rolling over separate retirement accounts of the same type into one at FAM Funds is an option you should consider. Some of the benefits include: tax-free consolidation of the accounts, fewer statements, time savings, and less potential for confusion. For example, miscalculating a Required Minimum Distribution (RMD) may lead to a 50% IRS penalty tax.

However, there are circumstances when it may not be wise to consolidate retirement accounts. For instance, to avoid a mandatory Federal income tax withholding, investors with a qualified retirement plan such as a 401(k) should make sure that a “direct” rollover option is available before consolidating. This way the account owner does not take possession of the assets and usually retains their tax-deferred status because the distribution check is payable to the IRA’s custodian or trustee.

We make it easy to roll over your retirement accounts into a FAM Funds IRA. There are more details to consider and IRA consolidation is not right for everyone, so please call me at 800-453-4392, option 2 or e-mail to discuss your situation. As always, I recommend including your accountant or tax preparer in the final decision.

Please see Fenimore disclosure.