Juggling might be fun, but most people probably wouldn't be able to keep all the balls in the air. Fidelity Investments says that half of Americans in their best years to save for retirement have their money in three or more accounts.
Whether they are 401(k)s from old jobs or IRAs that were forgotten, investors who have more than one account may have to deal with multiple statements and possibly more account fees. Most importantly, having a lot of different accounts may make it harder to stick to a diversified investing plan.
"It's natural to think that having more than one account will automatically diversify a portfolio," says Cynthia Egan of Fidelity. "But that's not always the case." "In fact, managing a mix of stocks, bonds, and cash across multiple accounts can be confusing and may make it harder to spot risks in your portfolio."
For example, some investors hold the same security in more than one account without realising it. If the price of that security goes down, the portfolio could take a big hit. With one view of all your retirement money, it's easy to tell how much is "too much."
When you combine multiple accounts into a single Rollover IRA, it can be easier to manage your savings because you can quickly look at what you have and make changes. Here are three more ways to make your portfolio easier to manage:
- Mix it up. We've all heard that a mix of stocks, bonds, and cash that's right for your age is the key to possibly better long-term performance. Diversification doesn't guarantee a profit or protect against a loss, but it does make it more likely. Make it easy on yourself by getting a lifecycle fund. As the date you want to retire gets closer, a professional will automatically rebalance the fund.
- Keep it moving. Like going to the dentist every six months for a checkup, you should look over your portfolio every year to make sure your overall plan for retirement is still on track.
- Find all of them. Find all of your accounts that can be merged, even if you have to spread your statements out on the kitchen table. This includes old IRAs and 401(k)s that you have forgotten about.
There are a lot of ways to manage your savings for retirement, which is good news. At the end of the day, though, combining your retirement accounts into a single IRA account can make it easier for you to evaluate your retirement assets, come up with a better plan for your retirement, and keep an eye on your investments to build your portfolio. This makes it easier to keep your eye on the retirement ball.
