Do You Need Help Consolidating Old 401(k) Accounts?

Do You Need Help Consolidating Old 401(k) Accounts?

July 18, 2022
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The days of an employee sticking with one employer throughout his or her career are long gone. With the rate that many Americans now change jobs, (1) having multiple employer-sponsored retirement accounts in your name is the norm. While you likely don’t give them much thought, these accounts may cause headaches down the road as you find yourself juggling various investment decisions, fees, and rules for each account.

The good news is that there’s a way to streamline the management of your retirement savings accounts and possibly maximize your returns: account consolidation. Here we’ll 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 and 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, while others only let you roll over after two years. (2) A financial advisor can look into this for you, or you can contact the plan provider to find out. 

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 retirement accounts:

  • What kinds of benefits and features do your retirement accounts offer?
  • Are there similar investment options in all your accounts? 
  • What are the fees associated with 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 your accounts. Here are just a few benefits to consider:

  • Reduced investment fees: Fewer retirement accounts can mean fewer fees. Instead of paying fees for each of your account management services, you’ll only 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 will 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 won’t need to worry about managing investments and documentation across different platforms. For example, instead of three monthly statements, you could have just one. You’ll also be able to see all of 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. (3) When juggling multiple accounts, you risk missing a required minimum distribution or 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 free up more time and energy for doing what you love. 

We Can Help You Consolidate

Although consolidating accounts may lead to greater returns and less headache in the future, the process can be challenging to navigate. If you have multiple retirement plans, we at Stratos Wealth Partners would love to talk about how we can help you optimize your plan. Schedule a complimentary introductory call by reaching out to us at 330-576-3912 or lguiney@stratoswp.com

About Liam

Liam Guiney is partner, financial advisor, and client portfolio manager at Stratos Wealth Partners, an independent investment advisory firm providing personalized financial plans to help clients pursue their goals. With over 20 years of experience, Liam is dedicated to walking his clients through their financial opportunities and challenges, simplifying the complex so they can focus on what’s most important to them. Liam is known for building long-lasting relationships and focusing on individual needs to develop strategies that will help his clients prepare for their ideal retirements. 

Liam graduated from the University of North Carolina Greensboro with a bachelor’s degree and earned a Master of Science at Wake Forest University. He is also a CERTIFIED FINANCIAL PLANNER™ professional. When he’s not working, Liam spends his free time with his wife, Alice, and their son, Nicholas. You can often find him exercising, golfing, or supporting his favorite community organizations through fundraising and volunteering, such as Catholic Charities, the Make-A-Wish Foundation, and cancer research organizations. To learn more about Liam, connect with him on LinkedIn.

This material was prepared for Liam Guiney’s use. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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(1) https://www.bls.gov/nls/questions-and-answers.htm#anch41 

(2) https://www.irs.gov/pub/irs-tege/rollover_chart.pdf   

(3) https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions