An IRA consolidation strategy is suggested, and the section concludes with a three-step action plan for investors like Patrick.
Patrick's Profile: During his career, Patrick has accumulated various retirement accounts but has lost track of the status of each.
Like trophies of your employment past, you've managed to accumulate a workplace savings plan for every job you've had.
While you should try to let your nest egg continue to grow as long as possible, it is good to know you have the option of using some of your savings without penalty — though you will, of course, still need to pay income taxes on any distributions.“This is not a decision that has to be made tomorrow,” adds Scheil, who is also the author of “The Complete Cardinal Guide to Planning for and Living in Retirement.” “You could decide to do nothing for a year or two and then roll it over.”Down the road, you may find benefits to moving your money into an IRA.
Every plan is different, but 457(b) accounts typically don’t offer nearly as many investment options as IRAs, says Scheil.
I've had several instances where an individual has had several old retirement plans from previous employers.
That has included defined benefit plans, 401k's, TSP's, 403b's and Keough plans.
With each 401(k) plan comes extra paperwork: annual statements, beneficiary designations, and so on.
When you consolidate all of your 401(k) plans into one, you simplify your life down to just one set of paperwork.
However, if you hold no employer stock in the plan, or if the administrative fees are too high, this might not be much of an incentive.
Sometimes having a 401(k) plan at several different brokers may have valuable perks that can make up for the hassle of the extra paperwork.
Mecca & Associates in Hoffman Estates, Illinois."If you're getting statements from Vanguard, Merrill Lynch and everyone else and you come home tired from work, you're not even going to look at the paperwork."Consolidating your retirement funds into a single account not only makes it easier to manage your asset allocation, says Mecca, but it can also help you avoid some costly mistakes."You may have duplication in your portfolio where you own two very similar funds with regards to investment philosophy and objectives," he says.
"The left hand doesn't know what the right hand is doing."Indeed, investors with multiple 401(k) plans run the risk of being overweight in one or two individual stocks or sectors within their portfolios.
This can make your investing strategy much easier to implement because you can have all your retirement funds in one place and you can keep better track of your overall portfolio.