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Over the years, you have likely acquired a number of retirement accounts. Now may be the time to streamline your holdings.

Frequent job and career moves are part of the new American workplace. As a result, over the years a growing number of people have accumulated a disparate collection of 401(k)s, IRAs and SEP plans.

Whether through inertia or the belief that they're diversifying their assets, many people leave this assortment of accounts untouched, sometimes for years. But while holding on to multiple retirement plans may offer the appearance of diversification, doing so can make it more difficult to determine whether your investments are working together to meet your retirement goals. In addition to making your life simpler, having fewer accounts can make it much easier to ensure your assets are working together as part of your retirement strategy.

More Flexibility to Consolidate your Accounts

Current regulations allow for consolidation between most types of retirement accounts. You may generally roll over retirement plan assets between different traditional and rollover IRAs and different employer plan types. The rules are more restrictive with a Roth 401(k), in which you contribute after-tax income but are able to withdraw money tax-free if certain requirements are met. It can only be rolled into another Roth 401(k) or a Roth IRA. For that reason, you may still be required to keep some of your retirement accounts separate — say, a 401(k) from your current employer (not yet eligible for distribution), a traditional or rollover IRA (holding assets from your accounts with prior employer plans) and a Roth IRA (holding any assets converted from your prior employer-sponsored retirement plan or a traditional IRA or rolled over from a Roth 401(k) account). Married couples should also remember that their retirement accounts can't be combined, because jointly owned retirement accounts are not allowed.

Holding a variety of accounts often makes it harder to maintain a consistent asset allocation strategy that is aligned with your goals. It can also mean that these critical retirement assets may not reflect, as a whole, your preferred risk tolerance, targeted asset mix and investment horizon. This becomes even more important as part of a plan to meet your income needs in retirement. Since you may need for your assets to satisfy multiple needs simultaneously as you transition into retirement (providing steady income, long term growth, tax efficiency, wealth transfer), coordinating across a broad range of accounts can be challenging. Consolidating some of these accounts can be an important first step in a process that will also involve suitable investment and cash-management strategies.

It's worth remembering that neglected accounts often become unbalanced over time, because normal fluctuations in the relative value of equities and bonds often shift as holdings outperform or falter, altering your overall allocation. "You may find that you're overly exposed to risk, or that you're not taking advantage of opportunities to buy low," says Bill Hunter, Director, IRA Program Management. "Unless it has been recently rebalanced, that 401(k) from a job you left eight years ago may no longer reflect your personal goals and risk tolerance."

How Much you Contribute

If you're still working, you may also want to review your contribution strategy. So long as you work for a company that sponsors a retirement plan, you may be eligible to automatically make contributions from your pre-tax wages. Your employer may even match your contributions up to a certain percentage. That makes participating with your current employer a sensible step even if you have a separate IRA. Of course when you leave that job, you'll no longer be able to contribute to that account (or receive any matching amounts). In that situation, your account balance will increase only if the existing investments perform well. Depending on the investment options available in your former employer's plan and other considerations, it may be to your advantage to roll that balance over to an IRA to afford you a greater range of investment options and ease of control in managing this assets as part of your broader plan.

Many 401(k) plans offer a fairly limited array of investment choices, depending on how the account has been set up by the sponsoring employer. "A traditional IRA generally allows you more options while extending tax advantages," Hunter says. While a typical 401(k) offers a fairly limited selection of mutual funds, for an IRA the number of offerings can range into the thousands. IRA holders also tend to have wider access to stocks, bonds and other investment vehicles.

Fewer Fees, Less Paperwork

Multiple accounts may also lead to unintended overlap in holdings as well as unnecessary account fees. Maintaining multiple accounts may also entail extra paperwork and increases the chance that you'll forget to update your address or beneficiary for one or more of your accounts. That can create headaches for you when you want access to the assets in a particular account and for your heirs when your estate is settled.

What's more, the complications for your estate might not end once the accounts are gathered. Leaving different accounts to different individual beneficiaries may lead to unintended inequalities and resentment, Hunter says. He adds, "Getting the right amount to each beneficiary is much easier with fewer accounts."