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Merge retirement accounts for cash and clout

If you've got a collection of retirement accounts -- almost 17 percent of American workers have five or more -- you should consider consolidating them into one or two accounts.

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More than 50 percent of workers have two or more accounts, such as 401(k) and SEP (Simplified Employee Pension) IRA accounts, according to a recent report by American Express Financial Advisors. "The clutter can really accumulate over time," says Eric Tyson, author of "Investing for Dummies" and "Personal Finance for Dummies."

If you're among the multiple account holders, you're probably paying more in fees and dealing with more paperwork than you should be. More significantly, it's difficult to get a good grasp of your overall retirement savings.

To be sure, there's no magic number of accounts you should hold. However, every year or two you should review your accounts and see if it makes sense to consolidate them.

Consolidation offers several benefits:

Better organization
For starters, you'll have a better idea of how your money is invested -- something that's difficult to figure out when you have a mishmash of accounts. And, without this information, it's difficult to respond to market changes. "If you want to take action, you have to first stop and get organized," says Doug Parker, CFP, account vice president with Sage Rutty & Co. Inc. in Rochester, N.Y.

Hanging on to a variety of accounts makes it more likely that you'll lose track of one -- along with the money in it. Or, the company overseeing an account may lose track of you. "Most of us aren't that good of record keepers," says Rick Meigs, president of 401khelpcenter.com.

Think you would never misplace an account? Think again. Meigs says he receives a half-dozen calls each week from people trying to track down old retirement accounts. With companies changing names, selling divisions and going bankrupt on a regular basis, it's easy for an account to get lost. "There is no national database (of accounts)," says Meigs. "You have to become a detective and track down where it's at."

Keener perspective
Like many investors, you may assume that you're diversified simply because you have a half-dozen retirement accounts. But often that's not so. Many people who hold numerous accounts simply have "several flavors of vanilla," says Parker. In other words, they may have different accounts, but they hold similar or even the same investments. It's not unusual to find the same stocks making up 30 percent to 40 percent of different mutual funds, especially if the funds are from one company.

-- Posted: July 27, 2004





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