Some financial advisers here say they’re seeing a growing segment of people nearing retirement asking how to handle scattered retirement funds.

Jerry Felts, principal at Jerry Felts CFP, of Spokane, says it’s becoming more common to see clients with a mixed bag of 401(k), IRA, and Roth IRA investments.

“Now, the average length of time someone spends with one company is something like seven or eight years,” he says. “They can have six different 401(k) plans, and it happens a lot that they never get around to moving them.”

They often seek help as they get within five to eight years of retirement.

“That’s one of most important times,” he says. “It may be time to restructure their portfolio so it’s not so aggressive, depending on the situation,” he says.

He says it’s often advisable to transfer 401(k) funds into IRAs and Roth IRAs.

One reason to consolidate scattered funds is to simplify reporting, Felts says. “It’s simpler for reporting when you’re not getting statements from different companies.”

One key advantage in rolling multiple 401(k) funds into IRAs is flexibility, he asserts.

“You probably will have more investment choices in an IRA account rather than a 401(k) account,” Felts says. “If you have an IRA, you can pick and choose what to invest in.”

It’s usually easier to select dividend-paying investments through an IRA than a 401(k) plan, he says.

“Most 401(k)s don’t have as many options in dividend payment investments,” Felts says. “If you can live off dividends rather than selling shares, the likelihood of making that money last forever is better.”

Felts also says people with multiple 401(k) plans should assess whether they’re getting adequate professional advisory assistance.

“With 401(k), you have an 800 number and they don’t even know who you are,” he says.

Kelly Ruggles, president of American Reliance Group Inc., of Spokane, asserts it’s typically best to consolidate investments for people who have a variety of retirement accounts as they approach eight years until retirement—if not sooner.

“It’s not so much consolidation for consolidation sake, but it’s more about thinking about building a portfolio to match the client’s goals with the least amount of risk,” he says. “One of biggest errors I see is people typically taking more risk than necessary to achieve goals—or they’ve not even set their goals.”

For people who have a number of accounts, the order in which they withdraw from them in retirement could be important in making retirement funds endure.

Roth IRAs and traditional IRAs have different tax implications, Ruggles says. Traditional IRAs, like conventional 401(k)s and other qualified investments, are funded through tax-deferred contributions, and withdrawals from them are subject to income tax.

Roth IRAs are funded through after-tax dollars and aren’t subject to income tax or minimum distribution requirements.

The common inclination is to delay withdrawals from IRAs and other qualified retirement investments, although that delay can sometimes be misguided, Ruggles says.

“People are very afraid of taxes, and they’re going to want to take income from nonqualified funds first and not IRAs,” he says.

Ruggles notes, however, that people with IRA accounts are required to take minimum distributions starting at 70½ years of age.

For example, someone turning 70½ in 2016 typically would be required to withdraw as taxable income $36,500 for every $1 million held in qualified retirement funds.

“I’ve seen people hit a higher tax bracket in retirement, because they’ve suddenly hit minimum-distributions age,” he says.

Paul Viren, owner of Viren & Associates Inc., of Spokane, says he’s seen a number of people who suddenly become motivated to rein in their scattered retirement funds.

“It’s event driven,” he says. “It happens when people hit certain milestones in life or when they change or lose their jobs or when their company is sold.”

From a planning perspective, Viren says, he often advises clients to simplify their retirement funds by consolidating old 401(k)s and IRAs.

He says it’s best to do that sooner, rather than leaving it for later, when heirs might have to clean up dispersed funds.

Many people haven’t been taught to manage retirement savings because their parents relied more on pensions, Viren asserts.

“Our parents haven’t taught us how to replicate income into the future,” he says.

Some people who have a number of funds might not be as diversified as they think, Viren warns.

“Every fund or investment has a cute name,” he says. “Some people may have four or five funds with different names and think they’re diversified, but it’s all the same.”

It’s common for employees to leave 401(k) plans with former employers, Viren says.

“They think it may be cheaper because it’s paid for by the employer, but in many cases that’s far from the truth because of plan administration costs and other expenses,” he says, adding, “A lot of people are casual about money management. They think it will be taken care of by a former employer or some government agency.”

He says it usually makes more sense when changing jobs to move 401(k) funds to the new employer.

“If someone has funds with a past employer, it’s usually very easy to move and consolidate them,” Viren says.

Certain public employees are exceptions to the consolidation guidance, he says.

“Some government employees we work with have money with public agencies,” Viren says. 

He adds, “Sometimes, it’s good to leave money there, because those plans are inexpensive, and they may have some other pension-like benefits.”

Such employees still can benefit from private professional help with their retirement plans, though, Viren claims.

“They might need some help to manage it because state or federal governments might not be good at customer service,” Viren says.