This isn’t your father’s retirement plan! No, tax law and company culture changes have shifted the responsibility for managing retirement accounts from the company’s shoulders to that of the employee. And judging by the size of the IRA accounts we see, the employees are doing a pretty good managing job!

It’s the very size of IRA accounts that raises planning problems, however. Where Dad’s IRA might have been for a few thousand, today it’s not uncommon for his children to have IRAs in six or seven figures.

The problems these larger IRAs pose are three-fold:

1. Managing the assets pre-retirement
2. Managing the assets after retirement, including dealing with complex required minimum distribution rules
3. Deciding what to do with an IRA for estate planning purposes.

This and my following column will speak to these issues.

Prior to retirement, the obvious objective is to manage the account to maximize growth and protect the principle. It is important not to trigger unintended taxation of the account. For example, it is not uncommon for an employee to change jobs every few years, each time leaving behind an orphan 401k plan. These orphaned plans should be consolidated into one IRA account through a trustee-to-custodian transfer.

Such a transfer will be considered a qualified rollover and not require mandatory withholding of 20% of the amount transferred—as would be the case if the employee withdrew the funds directly and then opened a new IRA account to accept the transfer.

Moreover, if an employee under age 55 attempts the do-it-yourself route and hangs on to the money more than 60 days, the rollover is disqualified and the owner will pay income taxes plus a 10% excise tax penalty for a premature withdrawal.

While you cannot borrow from an IRA as you can from many employer-sponsored retirement plans, you are allowed to roll the money over (take it out of the account and use it as you desire) for 60 days each year. Once per year per owner—but be sure it’s back not later than the 60th day!

By consolidating IRAs, the owner gains the advantage of ease of management. If set up in a brokerage account, then stocks, bonds, CDs, mutual funds, etc., may be combined in the IRA and the owner will see the entire account on one periodic statement.