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.
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
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.
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
Consolidation offers several benefits:
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.
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."
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.