By Oscar Casas, CFP®, CRPC®, MPAS®, ABFP℠
How many different jobs have you had over the years? If you are anything like most Americans, the answer is probably quite a few. With multiple jobs comes the probability of multiple employee-sponsored retirement accounts in your name. The more of these accounts you have floating around, the greater the chance for more fees, rules, and unique decisions for each individual account.
There is a way to avoid all this hassle. 401(k) consolidation is a great solution to bypass the headaches of dealing with so many accounts, while also helping you manage your retirement savings and possibly seeing a greater return on those savings. Let’s take a look at how it works and why it may be a good 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 all of your 401(k) accounts 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 account. 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 Consolidate
Consolidating your employee-sponsored retirement plans could be a great step toward a fulfilling retirement. And helping people pursue their goals for the future with confidence and clarity is one of the reasons I became a financial advisor in the first place.
At Tranquility Path Financial Advisors, we know that retirement marks a new beginning, and we are driven to help you start that new journey with excitement. If you are ready to consider consolidation or just want someone to work with you on your retirement plan, schedule an introductory meeting online or reach me at (732) 856-4324.
About Oscar
Oscar Casas is the chief executive officer at Tranquility Path Investment Advisors, an independent Registered Investment Advisor firm dedicated to putting their clients first, always. Oscar has over a decade of experience helping clients plan for a confident retirement. He is known for being an empathetic and compassionate listener and for prioritizing his clients’ needs and goals above all else. He acts as a coach, advising his pre-retiree and retiree clients through all the ups and downs on their financial journey. He loves that he has the opportunity to make a difference in people’s lives and take some of the stress off their shoulders.
Oscar has a bachelor’s degree in finance, a master’s degree in personal financial planning, and is a CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor℠, Master Planner Advanced StudiesSM, and Accredited Behavioral Finance Professional℠ professional. When he’s not working, you can find him enjoying the outdoors with his three children. He is an avid tennis player who also loves golf, the beach, snowboarding, traveling, and volunteering with the Scouts.
