How many retirement accounts do you have? By age 50, baby boomers have held an average of 12 different jobs – half of them since age 24 – this is according to the Bureau of Labor Statistics. You may be in a situation where you may have several 401k accounts from old employers, as well as a Traditional IRA, a Roth IRA, and maybe a SEP-IRA you setup to save income from freelance work.
While having more retirement dollars is good, having more retirement accounts isn’t necessarily so. By combining accounts, you may be able to cut fees and keep better track of your investments.
We see many people that come in to talk to us for the first time and they tell us that they have old 401k accounts and IRAs that they haven’t looked at in years. They have no idea how the investments are allocated or what the returns have been over the years. This mismanagement of these retirement accounts means you are most likely not growing your wealth properly and that opportunity cost means you may have less to live on in your retirement years.
A better way to keep track of your portfolio would be to consolidate all these accounts into one self-directed IRA. By combining accounts, you will reduce unnecessary complications that will happen later when you start drawing from the accounts. Don’t forget, required minimum distributions (RMDs) start when you reach age 70 ½ and having multiple accounts at various places normally means taking multiple RMDs. This increases the chances of missing an RMD which can lead to stiff tax penalties on top of the necessary taxes due.
So how does one consolidate their accounts? We recommend that as soon as you leave a job, roll that 401k into an IRA. If you have multiple IRAs, request direct transfers of all of them into one self-directed IRA. That way you have them organized and under one roof, which makes is easier to track and also makes the investment management more efficient. Come in and talk to us and we can help you with the entire process.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.