Every year we revisit our goals and set a new list of items to accomplish throughout the year. About this time of year we reflect on all the items that were left incomplete and try to justify the reasons why we didn’t get them taken care of. Today I’m challenging you to set a goal to complete before the end of this year. Consolidate your accounts and roll that old 401(k) into your IRA account.
We’ve all done it… you leave a job, find a new position, and in the chaos that surrounds a life changing situation, we somehow forget to bring our 401(k) account with us. There are many advantages to taking back the control of your investment accounts. Investment expenses, portfolio allocation and general consolidation are all excellent reasons to get a head start on 2013.
To start, the lower costs associated with moving your funds into your own brokerage account can be a huge advantage over time. By moving the funds from the 401(k) to an IRA, you give yourself the power to move from traditionally high cost mutual funds, to extremely low cost ETF’s or individual securities. In your own brokerage account you have a vast amount of investment choices, all of which are only a click away.
Another great reason to take action is the ability to rebalance the allocation in your account. Often times, we tend to make initial allocation decisions for our 401(k), which we then forget to rebalance for years at a time. Rolling your 401(k) into your IRA gives you the opportunity to revisit these allocations, and rebalance to a portfolio that aligns more closely with your investment objectives.
While investment expenses and rebalancing your portfolio are both excellent reasons to roll that old 401(k) over to your IRA, consolidating your accounts could be the most important in my opinion.
If you read my profile on our website, you will find that I tend to be a bit OCD when it comes to organization. Receiving 3 or 4 statements a month from different firms holding your 401(k) / IRA’s would drive me up a wall. By simply consolidating these accounts you will not only strengthen the efficiency of your investments, but you will also have the peace of mind that everything is organized all in one convenient place.
So you’re probably saying “OK, how am I going to take care of this by the end of the year?”
Well the good news is that it’s probably much easier than you think. The first step is to open a Rollover or Traditional IRA account with your broker (either one will work). After the account is open, simply contact your plan administrator for your 401(k) and tell them you’d like to roll your 401(k) into your IRA account. They will then ask you for the account number, have you sign one or two forms and you’re all done! It’s really that simple.
This same strategy should be taken for multiple IRA accounts that you’ve accumulated over the years. Take action this time and move these accounts into one convenient place. As always, if you have any questions during this process, give us a call at 214-220-0055 and we will be more than happy to help. So start 2013 off on the right foot and do a little house cleaning before the New Year!