Do You Have Multiple Retirement Plans? How To Consolidate And Maximize Returns
By Preston Rosamond
The world is not like the Mad Men series, set in the ’60s, where you stay with a company for your entire career and drink whiskey for lunch. Nowadays, a person will have a career that spans multiple employers. Mad Men also didn’t have 401(k)s. When a person retires, their retirement assets could be splintered around two, three, or more employers. How do you get a handle on all the plans you’ve left behind? And why is it important to consolidate your retirement accounts?
Required Minimum Distributions
There are several reasons why you want to gather up your employer plans and consolidate them. One reason is required minimum distributions (RMDs). RMDs are a percentage of your assets paid out to you based on your account balances and life expectancy. RMDs are now required starting at age 72. When your assets are spread out amongst institutions, it’s hard to get a handle on calculating your RMDs. While you can take your entire RMD from one account, it is still based on the balances as a whole. It’s also easy to make a mistake in calculating, or you may even miss one account, and in doing so, it will cost you a penalty of 50% of your RMD. That is a huge mistake!
Asset Allocation
You also want to consolidate your accounts to get a better indication of your asset allocation. You could be duplicating your efforts with several accounts. Your portfolio might even be misallocated. Consider this, for example: two of your plans include the same mutual fund or different funds but with the same investment objective. You are doubling your exposure to specific industries, sectors, or even asset classes. Bringing your accounts together will eliminate this issue.
Fees
How much are you paying in fees for your company plan? Did you even know you were paying fees? There are several types of fees for 401(k)s. (1) Investment fees are built into the mutual funds you own in your account, called expense ratios. There are also plan administrative fees and individual service fees for things like loans from your plan. By bringing together your assets, you can have a complete look at the fees you pay and pay less.
Is consolidating your accounts as easy as filling out some paperwork? Yes, but beware, you should only initiate custodian-to-custodian transfers. If you receive the check, you need to roll over the funds within 60 days or risk paying penalties. It’s easy to lose track of time, so avoid it altogether and transfer directly to a custodian. If you also have after-tax money in your retirement plans, it will need to be put in a separate account.
Consolidating your retirement accounts can mean a more comprehensive management of your assets and a holistic financial plan without unnecessary fees cutting into your performance. Imagine getting only one set of statements or just having one login. It’s very convenient, practical, efficient, and smart.
We Can Help You Consolidate And Maximize
If you have multiple retirement plans floating in the ether, then let The Rosamond Financial Group help you consolidate your assets and maximize your returns by providing you with a comprehensive retirement plan. Call our office at 830-798-9400 or email smrosamond@rosamondfinancialgroup.com. We look forward to hearing from you soon!
About Preston
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with nearly two decades of industry experience. He provides comprehensive wealth management and financial services to individuals, professionals, and families who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch and a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing smrosamond@rosamondfinancialgroup.com or schedule a call with our online calendar.
____________