Over your working career is possible you’ll accumulate multiple retirement accounts if you switch jobs frequently and there’s also the possibility that you’ll have multiple IRAs depending on if you’ve moved switched advisers, or wanted to give a fledgling adviser their first sale.
Eventually, annual statements start pouring in from all of these accounts and it can be difficult and stressful to keep track of all of the accounts and where your money is being held. For example, you may have to 401(k) plans from two previous employers in addition to the plan you have with your current employer. You may also have two or three IRAs that you’ve opened over the years and whether or not their traditional or Roth can complicate things even more. Here’s a way to organize your retirement account and reduce your stress when it’s time to receive statements.
- Consider combining your old 401(k) plans to your current plan. Not only will this reduce the blizzard of paper you receive it’s a way to have one 401(k) beefed up by the other plans’ money coming in. Plus, you can keep adding to your current plan. One downside is if your current plan’s fees and expenses are more expensive that the old plan. There’s a remedy for this.
- Consider rolling over your old 401(k) to an IRA. Generally, you can roll over your previous 401(k) plans to your IRA without taxes or penalty. It’s important that you do a direct rollover from plan sponsor to plan sponsor – a trustee to trustee transfer. If you’re thinking on moving from a 401(k) to a Roth IRA, be sure you talk with a competent tax professional to avoid any tax snafus.
- Consider combing all of your IRAs into one. One way to do this is to pick the IRA custodian with the lowest fees and expenses and move and combine the accounts to that custodian. You can combine traditional IRAs to other traditional IRAS and Roth IRAs to other Roth IRAs. Should you consider combining a traditional IRA to a Roth IRA, again talk with a competent tax professional to make sure you do things correctly. The point is to reduce stress, not create it.
- Consider online statements. Once you’ve got your accounts combined and simplified as possible it may be a good idea to receive online statements. Generally, most custodians will provide this for free (as it saves them money on postage) and some may offer additional discounts for doing so. You can keep your statements on your computer or in the cloud using any number of reputable online storage companies.
- Finally, don’t look at your statements often. If your investment horizon is long, consider looking at your statements annually – if that. If you’re a nervous nelly this can reduce the stress of panic when markets gyrate. Look at your statements if you’re calculating your net worth or if you need to rebalance, but looking every month or quarter to see how you’re doing is futile.
Sterling Raskie, MSFS, CFP®, ChFC®
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