In the following post, D’Amore-McKim School of Business Associate Professor Coleen Pantalone highlights the importance of managing your retirement accounts as you navigate your career path.
As people change jobs more frequently, it gets easier to just not worry about rolling over those old 401k accounts. But it is important to take the time to do it. First, by consolidating into a single rollover IRA, you are able to better manage your retirement money. With all the money in one place, it is easier to make allocation decisions – what percent in stock funds vs. bond funds for example. With lots of little funds floating around, you end up doing a lot of arithmetic to figure out what you have where and what it all means in terms of overall allocations.
A second reason to not leave those accounts untouched is that you can lose sight of them. All it takes is forgetting one time when transferring information from one piece of paper or spreadsheet to another, and you’ve lost the record of that account. If you move or change email accounts (say you were hacked), will you really remember to change your contact information on all those little accounts, especially as the number of them grows? And, too much time with no activity in an account can lead the institution managing the account to wonder if you are still alive. If they can’t find you, the money can disappear. You will probably be able to recover it if you remember, but what a hassle. And, if something happens to you, your heirs won’t know to even look for the money.
So, when you switch jobs, take the time to move your dangling 401k to a rollover account. It will make the management of your retirement accounts easier and your heirs will thank you.