Cut Down on Potential Complications With One IRA

A couple having a walkIf you’re worried about having enough to retire comfortably, you may be giving more thought than ever before to how you manage your money. But if you're like many people headed toward retirement, you probably have retirement accounts at several institutions. Many people work for multiple organizations over their career, and end up with IRAs, 401(k)s or 403(b)s in two, three, four or even more places. This can add to the stress of planning for retirement — one way to cut down on that stress may be to consolidate some or all of these accounts.


What can consolidation do for you?

There are a couple of good reasons to consolidate during these crucial preretirement years.

Save time and headaches

Having multiple retirement accounts means more statements to look at, more fees to keep track of and more accounts to adjust as things change, whether in the external environment or in your own comfort level with risk.

Help you get the right asset allocation

Consolidating makes it easier for you to invest your money in a way that can help meet your goals. Working with an advisor to find the right asset allocation for you, and rebalancing your account every year (or even more frequently), becomes more complicated than necessary if you have funds in multiple places. Getting the right asset allocation for you is only possible if you rebalance — that is, do the buying and selling necessary to keep the allocation where you and your advisor have decided it should be.1

Why do people procrastinate when it comes to consolidation?

Many people are content to leave things the way they are or just don’t have the time. Other people are hesitant to have all their money in one place or like their investments where they are today. Still other investors are concerned that exiting their current positions might require them to pay commissions, back-end fees or penalties.

These are all valid concerns, and deserve to be addressed.

  • If you’re investing all your funds with one firm, you should be sure the firm is financially sound by researching external sources.
  • If you have investment choices you like in an IRA you’re already using, you should look to preserve those choices when you move, perhaps by picking an institution with a noncaptive model, meaning it offers access to other firms' investment funds.
  • If you’re concerned about the financial consequences of liquidating and then transferring your current retirement holdings, it may make sense to get help from an advisor or other financial expert. In some cases, fees may dictate against consolidating, whatever other benefits it may have.

The right place for your money: accessible and flexible

If you decide that you want to consolidate your accounts, you can narrow down your prospect list of financial service firms using two criteria.

How easy is it to do business with the company?

Everyone has different preferences for how they get financial advice, and may even prefer different ways depending on the service they’re seeking. You should go with a company that can offer high-quality advice in a variety of ways: face to face, online and on the phone.

How much flexibility does the institution offer to people consolidating?

Your retirement account isn't just a savings vehicle; it's also a bridge to consistent investment performance and professional advice, and part of your income in retirement. You should look for a firm with a range of investment options that can turn your investments into a guaranteed lifetime income stream — perhaps in the form of annuities.2 You should also look for places that offer you the option of advice and guidance, including asset allocation and rebalancing as needed. That way, you can concentrate on maximizing your income in what are, after all, prime earnings years, and leave the complicated math of investing to the professionals.

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