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Are we strong candidates to consolidate our retirement funds?

My wife and I (in our low 50's) have 401(k) accounts from 5 different employers. We also both have IRA accounts, individual stock accounts, and other various mutual fund accounts. All together, I count 33 different mutual funds and 5 different individual stocks. I recently performed an exercise to ensure the fund fees were all below 1%; in fact, most of our fees are below 0.7%. We are generally satisfied with their performances as well. Still, should we be moving to consolidate and if so, are there general guidelines as to where we should be moving everything and how to go about doing it?

Retirement Savings, Asset Allocation
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May 2017

Fantastic question and thank you for asking!

You may be strong candidates for consolidating, but there are a couple of considerations before doing so.

The fees that you have on the accounts seem reasonable, however, there may be some additional fees to consider. In addition to looking at the expense ratios of the mutual funds, there may also be administration fees and servicing fees attached to these 401(k) plans  If, indeed, there are other fees on the retirement plans that you have not noticed or been aware of, your decision to consolidate may be more clear. Also, take note of any fees attached to any IRAs that you are considering, like any annual admin fees or fees for closing the account.

Of course, fees are not the only reason to consolidate. The investments themselves may need some attention. The biggest concern for your portfolio may be overlap and the concentration of your dollars to certain asset classes. You may be way overweight in US Large Cap stocks, which is a common issue for folks with multiple retirement plans and mutual funds. This over concentration could affect your returns as well as your risk profile.

Another big consideration is peace of mind. If having your money scattered all over the place causes undue stress or anxiety, then absolutely, you should consolidate. Many folks talk about the numbers and often overlook the mental health side. I am a firm believer that you can make better money decisions and take better action on your portfolio if you are in a place of peace, as opposed to anxiety.

Lastly, if you are self-managing your investments at this point and you are spending too much time or are starting to have more questions about what retirement is going to look like from a draw down perspective, it may be time to consider hiring an advisor to help get you to and through retirement. There are many advisors that are fiduciaries, that do not sell products, that can truly help you and may be able to reduce your fees even further. I hope this is of some help. If you still have questions, consult with a fee-only financial planner.

May 2017
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