The Benefits of Consolidating Old 401(k)s
1. Keep Everything in One Place
Let’s start with the obvious: having multiple 401(k)s means you’re tracking multiple statements, login credentials, and investment platforms. One account might be with a provider you barely recognize, another might still be tied to a company that no longer exists.
With nearly $2 trillion in forgotten accounts, consolidating can potentially help simplify your finances. Instead of logging into three or four different accounts every few months, you can see your entire retirement savings in one place. It’s like tidying a cluttered closet, giving you a clear view of everything you own.
2. Easier to Track Your Investments
When your money is spread across multiple accounts, it’s harder to see the big picture of your retirement strategy. Some of your accounts might be invested in low-risk options, while others are in higher-risk options. Without a single view, it’s easy to lose track of your risk level, fees, or asset allocation.
Consolidation lets you rebalance more effectively. You can make sure your investments align with your goals and timeline, whether you’re 30 and ramping up savings or 50 and trying to catch up. One account means one plan, helping make it easier to stay on track.
3. Potentially Reduce Fees
Different 401(k) plans come with varying fees. Maintenance fees, administrative costs, and other hidden charges are common and can quietly reduce your savings over time. Americans who leave behind just a handful of accounts early in their careers can lose out on over $90,000 by the time they retire.
Rolling your old 401(k)s into an IRA can give you more flexibility and control than most employer plans. IRAs typically offer a wider range of investment options, especially ETFs, so you can build a portfolio that matches your goals and risk tolerance.
4. Protection Against Employer Changes
401(k) plans aren’t set in stone. Companies can change investment options, fees, or rules at any time. Even more, if you’ve forgotten about an old account or the company no longer exists, your money could be moved into default investments, incur higher fees, or become harder to access. By rolling your funds into an IRA, you take control and safeguard your savings.
5. Estate Planning Options
While it might not be the first thing on your mind, consolidating can help streamline decision-making for your heirs. Multiple old 401(k)s can complicate things if something happens to you. Having a single account helps make it simpler for beneficiaries to track down and access the money, potentially reducing stress and confusion down the line.
