Financial Advisor's Solution for the Migraine of Managing Multiple Retirement Investments
In the world of retirement planning, managing multiple accounts can become a complex and overwhelming task. However, consolidating these accounts can offer several advantages, making your financial life easier and potentially improving your investment performance.
The Kiplinger Building Wealth program introduces us to financial advisers and business owners who share their expertise on retirement, estate planning, and tax strategies to preserve and grow wealth. One such strategy is consolidating retirement accounts.
Types of accounts that can be consolidated include 401(k) plans, IRAs, SEP IRAs, and SIMPLE IRAs. By rolling over these accounts into one IRA or a 401(k) plan, you can simplify management, reduce paperwork, minimise stress, save time, and potentially improve investment performance.
Tracking required minimum distributions (RMDs) from multiple accounts can be frustrating, but consolidating makes it easier to calculate and take the RMD. Neglecting some accounts over time can lead to missed opportunities to rebalance the portfolio, especially if investment choices made years ago no longer align with current goals.
Neglecting to weigh all options and ensuring that managing retirement accounts is a streamlined process toward a pleasurable retirement is important. Investment fees add up and can be hard to track when you have multiple accounts. Leaving multiple accounts after the death of a spouse can be overwhelming for the surviving spouse, making managing the money and executing the estate plan simpler through consolidation.
However, it's crucial to note that consolidating isn't the best move for everyone, and certain types of accounts, such as annuities and securities, cannot be transferred. Always consult a financial advisor to see if it makes sense for you.
Key steps and considerations include choosing the right consolidation vehicle, using direct rollovers, aligning investments, reducing fees, simplifying RMDs, estate planning, checking account restrictions, and being aware of potential overlaps in investments and difficulties with asset allocation.
In summary, consolidating retirement accounts can streamline your finances, reduce administrative hassle and stress, optimise investment management, and potentially save on fees and taxes. However, personalised advice is essential, as consolidation may not be suitable for everyone depending on tax implications, withdrawal needs, or account restrictions.
This article was written by a contributing adviser, not the Kiplinger editorial staff. Records for the adviser can be checked with the SEC or FINRA.
[1] Kiplinger. (2021). Consolidating Retirement Accounts. Retrieved from https://www.kiplinger.com/retirement/planning/603301/consolidating-retirement-accounts [2] Kiplinger. (2021). How to Consolidate Your Retirement Accounts. Retrieved from https://www.kiplinger.com/retirement/planning/603301/consolidating-retirement-accounts [4] Kiplinger. (2021). Why Consolidating Retirement Accounts Makes Sense. Retrieved from https://www.kiplinger.com/retirement/planning/603301/consolidating-retirement-accounts [5] Kiplinger. (2021). How to Consolidate Your Retirement Accounts. Retrieved from https://www.kiplinger.com/retirement/planning/603301/consolidating-retirement-accounts
Personal-finance experts suggest consolidating multiple retirement accounts, including 401(k) plans, IRAs, SEP IRAs, and SIMPLE IRAs, into one account to simplify management, reduce paperwork, and potentially improve investment performance. Consolidating accounts can also make it easier to track required minimum distributions (RMDs) and optimize asset allocation, potentially saving on fees and taxes. However, it's essential to consult a financial advisor to ensure that consolidation makes sense for your personal-finance situation.
