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Do You Have Multiple Retirement Plans? How to Consolidate and Maximize Returns Thumbnail

Do You Have Multiple Retirement Plans? How to Consolidate and Maximize Returns

By Angela Dorsey

If you know anything about retirement accounts, you know there are lots of them. You have probably switched jobs a couple of times throughout your career and have multiple accounts from previous employers. Combine that with plans you have set up for yourself, and you could have a confusing mess on your hands.

Luckily, account consolidation is a way to streamline your retirement savings and possibly maximize your returns. Read on to learn more about what account consolidation is and why it may be a good option to consider.

Understanding Your Options When Consolidating

Different retirement plans have their own benefits but also their own sets 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, and some only let you roll over after two years. (1)

How to Decide if Consolidating Is for You

How do you know if it’s time to consolidate? There are a few things you’ll want to consider before consolidating multiple retirement accounts.

  • What kind of benefits and features do your retirement accounts offer?
  • Are there similar investment options in all of your accounts? 
  • What are the fees like on 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 multiple plans into one account. 

Here are just a few benefits to consider:

  • Reduced investment fees: Fewer retirement accounts can also mean fewer fees. Instead of paying fees for each of your account management services, you only need to 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 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 don’t need to worry about managing investments and documentation across different platforms. For example, instead of three different monthly statements, you just have one. You can see all 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. (2) When juggling multiple accounts, you risk missing a required minimum distribution or risk 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 and Maximize

Consolidating can mean greater returns and less headache in the future, but it can be challenging to navigate the process. If you have multiple retirement plans, let’s talk about how we can help you maximize your returns. Our clients can reach us at (310) 370-7776 or angela@dorseywealth.com. If you would like to learn more about Dorsey Wealth Management and how we can help you reach your financial goals, schedule a free introductory 30-minute phone call

About Angela

Angela Dorsey is the founder and fiduciary wealth manager at Dorsey Wealth Management, a fee-only financial planning firm helping successful women and couples prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a Certified Financial Planner™ (CFP®) and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband and two children. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.

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

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