By Bill Taber
Are you one of the many individuals who have accumulated multiple 401(k) accounts over the course of your career? It’s not uncommon to find yourself with a scattered collection of retirement funds, especially if you’ve changed jobs multiple times.
But managing numerous accounts can be overwhelming and potentially detrimental to your long-term financial goals. That’s where the process of consolidating old 401(k) accounts comes into play. Let’s explore the advantages of streamlining your retirement savings and how you can better understand your options.
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 Consolidate and Maximize
Consolidating old 401(k) accounts can help maximize your retirement savings. This process can be complex, so it’s wise to seek professional guidance for a smooth consolidation.
Reaching out to a financial advisor with experience in retirement planning can provide the support you need. We at Taber Asset Management would love to help produce a plan unique to you. Get started today by scheduling a 15-minute intro phone call online or reaching out to us at 515-557-1860 or invest@taberasset.com.
About Bill
Bill Taber is President and Founder of TABER Asset Management, an independent, fiduciary wealth management firm that strives to do one thing well: manage their clients’ money by creating wealth, building wealth, growing income, and preserving capital so they can experience financial freedom. With more than four decades of experience, Bill is dedicated to building relationships with his clients and their families and walking alongside them as they navigate financial decisions. His favorite days are the ones when he gets to witness the joy and relief on his clients’ faces when they realize they can pursue their dreams and live their ideal lifestyles. Bill is known for going the extra mile, getting things done with integrity, and working with a stewardship mentality.
Bill graduated from the University of Iowa with a bachelor’s degree in business administration and fell in love with the profession when he got to help one of his first clients—his father—turn his lifetime of hard work into a dream retirement. He got his start in the industry as a corporate services representative for Bankers Trust Company and spent decades working as Assistant Vice President of E.F. Hutton & Co. and First Vice President of Principal Financial Securities. He is also a graduate of the E-Myth Worldwide Mastery Business Development Program and is Series 65 registered.
In his spare time, Bill enjoys giving back to his community and served 11 years as a member of the Board of Trustees of Broadlawns Medical Center and 14 years as a Community Representative to their Board Finance Committee. He is also one of the founding members of the Greater Des Moines Connections Mentoring Program. When he’s not working, you can often find Bill spending time with his family and participating in one of his many hobbies, which include traveling to national parks, presidential libraries, and foreign countries; gardening; reading non-fiction; and practicing yoga, Pilates, and meditation. He also loves the simple joys of listening to music, going for walks or bike rides, and watching James Bond 007 films and any movie starring his favorite actress, Meryl Streep. To learn more about Bill, connect with him on LinkedIn.