The average person born between 1957 and 1964 held 12 jobs between the ages of 18 and 48, according to data from the Bureau of Labor Statistics. Many younger workers — millennials and Gen Xers — can expect to have that many jobs, if not more. With workers of all ages staying at jobs for an average of just 4.4 years, many people are building a collection of retirement accounts.
That can create some challenges. For one, job hoppers may end up with less in savings as they lose out on employer-matching contributions by leaving before they’re fully vested, cashing out savings when they leave an employer, or having to wait to be eligible to participate in an employer’s plan. Another big challenge is what to do with all those different accounts.
The Case for Consolidation: Simplicity
If you have multiple 401(k) plans, there are a few good reasons to consolidate. One is that it simplifies recordkeeping. When you can restrict yourself to just one or two retirement accounts, you’ll receive fewer account statements and have less paperwork to file. You’ll easily be able to tell how much you have saved, since you’ll only need to look at the balances for one or two accounts. Finally, when it comes time to take required minimum distributions in retirement, you can easily determine how much you need to take, rather than having to total up the balances in half a dozen accounts or more.
The Case for Consolidation: Better Planning
By having just one or two accounts, accounts, you will be better able to ensure your assets are invested in an appropriate way and determine that you’re on track to reach your retirement goals.
If your money is in a previous employer’s 401(k) plan, you don’t have much of a choice about who the account custodian is, the investments you can choose, or how much you pay in fees. That’s a problem, since not all 401(k) plans are created equal. Some have alarmingly high fees, or some may not have the range of investment choices you want.
Even if you’re happy with the investment choices and fees in an old 401(k) plan, keeping those assets separate from your other retirement savings could cause problems. You might inadvertently end up with a riskier portfolio than you would like because of the way you’re invested. Once you reach retirement, you’ll be better able to track your total wealth and stick to sustainable withdrawals if all your money is in one place.
I Can’t Find My Money
The money you contributed to a 401(k) plan is still yours, even if you’ve forgotten about it. But what if you no longer have paperwork relating to the account or you’re not sure if you even have an account with a previous employer? In that case, ferreting out your lost savings can be a bit more challenging.
One possible option is to reach out to your former employer and try to find out what happened to your retirement benefits. You can also contact the National Registry of Unclaimed Retirement Benefits.
Please call if you’d like to discuss this in more detail.