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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
It's important to consolidate your 401(k) plans before you end up paying more than they are worth. Why You Should Consolidate Your Retirement Plans By Britt Erica Tunick If you’re like most people you’ve probably worked for multiple companies throughout the course of your career and have a similarly diverse collection of different 401(k) accounts and IRAs to show for it. According to the Bureau of Labor Statistics, the average person now holds 10 different jobs by the time they are 40 years-old. Maintaining separate retirement accounts can be a costly mistake. While the fees associated with each retirement account may be minimal, when added together over the long term they can eat away at the overall amount you are saving for retirement, particularly when you factor in the power of compounded interest. Given this reality, consolidating accounts is one of the easiest ways of boosting your long-term savings by eliminating fees. Consolidating accounts is also a good move, as it makes it easier to get a complete picture of your total savings and to gauge where you are in relation to your ultimate retirement goals. Consolidating accounts can also open up the number of investment options that are available to you, as many company sponsored 401(k) plans have limited options for where the money within them can be invested. If you currently have a combination of retirement savings plans that includes both a company-sponsored 401(k) plan and a bank managed rollover IRA, you should take the time to look into both and see which has the best investment options and the lowest fees. Often the two will not be found in the same place, so you may even want to consider rolling both into a third IRA managed by another bank or securities firm. Consolidating accounts can also make things easier at the time you retire by reducing the likelihood that you could wind up being hit with penalties because of the different distribution requirements between different plans. |
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