Too Many Accounts

Q – I’m a few years from retirement and have several 401(k)s, which, combined with Social Security, should be more than enough. But I don’t want 8 accounts to keep track of in retirement, what should I do?

A – Your situation happens to a lot of us. Old 401(k)s, IRAs, etc., that just seem easier to let grow where they are than to make the effort to consolidate. But unless you empty them one by one, the problem doesn’t go away. More importantly, you’re right to think about complexity as you get older. There can be some unintended consequences of too many accounts: updating beneficiaries, figuring out Required Minimum Distributions, and not having access to the types of funds and investments you’ll need in retirement.

Some fund companies have great fund options up to retirement, but then offer much less in income-oriented funds needed post-retirement. Some have more stock funds and fewer bond or income funds. So, yes, it makes sense to consolidate over time, focused on post-retirement needs. There’s no right number of accounts to have. Certainly, you could consolidate everything at one service provider, which might be ideal for some people. Or, depending on the size of each, keep them as separate “buckets” for near-term, mid-term, and long-term use. And since we really don’t know at what age it can be challenging to deal with more complex financial issues, it’s better to take care of this sooner rather than later. BTW – I’m a big advocate for automating when is makes sense. If you can support, say, the next 10 years in retirement with certain account automated distributions to your bank account, that’s a win in my book.