Should You Consolidate Retirement Accounts? – Sterling Journal-Lawyer
One of the rewards of working for decades is the ability to contribute to tax-advantaged retirement accounts, which can help provide you with the income you need when you retire. Over the years, you may have accumulated multiple retirement accounts, such as IRAs and 401(k)s or similar employer-sponsored plans. But you might find it beneficial to consolidate these accounts with one provider.
Consolidating them can provide you with several potential benefits, including:
• Less confusion and clutter: If you have multiple accounts in different locations, it can be difficult to keep track of tax documents, statements, fees, disclosures, and other important information. Consolidating accounts could help provide clear and simplified account maintenance.
• Less risk of “lost accounts”: It may be hard to believe, but many people abandon their retirement accounts, leaving behind thousands of unclaimed dollars. In fact, by the end of 2021, there were nearly 25 million forgotten 401(k) accounts, or about 20% of all 401(k) assets, according to an estimate from Capitalize, a financial services company that helps individuals to retire. plan assets in new accounts. It’s possible that employers could even move small, old accounts from their 401(k) plans to an IRA on behalf of their former employees, increasing the chances of savers losing track of their money. By consolidating your retirement plans with one provider, you can ensure you don’t lose track of your hard-earned money.
• Ability to follow a unified strategy: With multiple retirement accounts and different investment portfolios, you may find it difficult to maintain a unified financial strategy suited to your goals and risk tolerance. But once you consolidate your accounts with one provider, it will be easier for you to manage your investment mix and rebalance your portfolio as needed. The need to rebalance may become more important as you approach retirement, as you may want to transfer some of your assets to investments that are not as sensitive to fluctuations in financial markets.
• Possible improvement of investment options: Often, 401(k)s can have limited investment selection, so consolidating accounts with a full-service company can allow for a wider range of products and strategies. This broader exposure can potentially help you improve your overall retirement income strategies.
• Greater ease in calculating RMDs: Once you reach age 72, you’ll need to start making withdrawals — called required minimum distributions, or RMDs — from your traditional IRA and your 401(k) or similar plan. If you don’t withdraw at least the minimum amount, which is based on your age and account balance, you could face a penalty. If you have multiple accounts, with different providers, it might be tedious and difficult to calculate your RMDs — it will be much easier with all accounts under one roof.
So if you have multiple retirement accounts, consider consolidating them. The consolidation process isn’t difficult, and the end result can save you time and hassle, while helping you manage your retirement income more effectively.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, SIPC member. Ann Bowey is a financial advisor to Edward Jones at Sterling.