If you’ve held various jobs over the years like most Americans, you might have multiple 401(k) retirement accounts, and possibly a couple of IRAs as well.
While there’s nothing inherently wrong with this, managing multiple retirement accounts at different institutions can be challenging, costly, and confusing. The great news is that streamlining the management of your retirement savings and potentially optimizing your returns is possible through account consolidation. Let’s explore how this process works and why it could be a valuable option for you.
Understanding Your Consolidation Options
Different retirement plans have their own benefits, but also their own set of rules. It’s important to first get an understanding of the rollover options available to you. You may or may not be able to roll some types of accounts into others; some accounts only allow rollovers once every 12 months; and some only let you roll over after two years.
Is Consolidating Right for You?
How do you know if it’s time to consolidate? There are a few things you’ll want to consider before consolidating multiple retirement accounts.
- What kind of benefits and features do your retirement accounts offer?
- Are there similar investment options in all your accounts?
- What are the fees like on each of your accounts?
- Can you roll over previous plans to a new employer? Or do you need to move to a self-directed retirement account?
You’ll want to do your research to answer these questions before you make any moves. And remember, you don’t necessarily need to consolidate everything into one. You can merge some while keeping others open. What’s best for you will depend on your specific situation and goals for retirement.
Benefits of Consolidating Multiple Retirement Plans
When it comes time for retirement, there are several benefits of consolidating multiple plans into one account.
Here are just a few benefits to consider:
- Reduced investment fees: Fewer retirement accounts can also mean fewer fees. Instead of paying fees for each of your account management services, you only need to pay one—meaning more of your money can grow.
- More opportunities to save: You can’t contribute to an old employer-sponsored 401(k). You need to roll over the account to a new 401(k) or a self-directed account so you can continue contributing to that retirement fund.
- Reduced administrative work for you: Fewer accounts mean simpler management. You don’t need to worry about managing investments and documentation across different platforms. For example, instead of three different monthly statements, you just have one. You can see all your investments in one location for more cohesive planning.
- Simpler portfolio rebalancing: When it comes time to rebalance your portfolio, having all your accounts consolidated makes it easier to calculate your asset allocations.
- Easier calculations and withdrawals of required minimum distributions: If you have multiple 401(k)s at retirement, you will eventually need to take required minimum distributions (RMDs) from each of those accounts. When juggling multiple accounts, you risk missing a required minimum distribution or risk withdrawing the incorrect total amount, for which the IRS can make you pay a penalty. Having a single account makes RMDs much easier.
- A clear picture of your money: Consolidating your accounts allows you to clearly understand how well your investments are working for you while enabling you to easily tweak the account to meet your retirement goals.
Lastly, one of the biggest benefits of consolidation is saving time. Time is one of your most valuable assets. Having one consolidated account means you’ll spend less time managing all your accounts and instead spend it doing what you love.
We Can Help You Streamline Your Savings
Combining your retirement accounts can lead to higher returns and reduced stress in the long run, but navigating the consolidation process may seem complex and daunting. If you have multiple retirement plans, we are here to guide you through the process and optimize your returns. Take advantage of a complimentary get-acquainted meeting to explore how we can support you. Schedule an introductory meeting online or reach out to me at (770) 627-4157 or Garrett@MyHorizonPG.com to begin the journey toward a more streamlined and prosperous financial future.
Garrett L. Holcombe is president at Horizon Planning Group, a full-service financial planning firm committed to always doing what’s right for their clients. With over a decade of experience, Garrett specializes in serving small business owners, giving them a step-by-step process to help them overcome the challenges they face every day and take advantage of the opportunities available to them. His vast knowledge and dedication to his clients allows him to tailor a plan to his clients’ needs and goals, whether that’s creating a start-up plan, financing and tax strategies, employee benefits, and more—all so that his business owner clients can experience confidence in their financial future. Garrett is known for his passion for education. He takes on the role of a teacher so he can help his clients feel empowered about their decisions and understand their financial situation thoroughly. He wants his clients to know that he’s always there for them, no matter what their questions or concerns are, and is always working behind the scenes to keep your plan moving forward.
Garrett graduated from Kennesaw State University with a bachelor’s degree in political science and is a CERTIFIED FINANCIAL PLANNER™ professional. When he’s not serving his clients, Garrett loves spending time with his wife, Amber, and their two children, Samantha and Matthew. Garrett and Amber were one of the first foster homes with Goshen Homes, a foster care agency of Goshen Valley that specializes in keeping siblings together. They adopted their children through the foster care program. Garrett is heavily involved in his community, serving as an adult leader and the safety and training officer for Sea Scout Ship Southwinds 100, and is president of the Cherokee High School Band of Warriors Booster Club. He is part of the Woodstock Business Cub and an active member of his church. In his downtime, he loves cheering for the Braves and Georgia Bulldogs and is an avid Liverpool Football Club and Atlanta United fan. To learn more about Garrett, connect with him on LinkedIn.
This is for educational and informational purposes only and is not research or a recommendation regarding any security or investment strategy.
The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and its advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. This report may not be reproduced, distributed, or published by any person for any purpose without IFP’s express prior written consent.
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