According to a recent study by Capitalize, 1 in 5 employees are leaving their 401(k) accounts behind when they switch jobs. This has resulted in over $1.65 trillion worth of assets sitting in abandoned accounts. While some may not see the harm in having multiple 401(k) accounts open, there are several benefits to consolidating them.
One major reason to combine 401(k) accounts is to lower fees. With multiple accounts, individuals may be paying fees on each one, which can quickly add up. Additionally, managing several different investment accounts can be time-consuming and burdensome. By consolidating accounts, individuals can have a clearer picture of their savings and retirement goals.
Having a single 401(k) account can also make things easier for beneficiaries in the event of the account holder’s passing. It reduces the work and stress that loved ones will have to endure when trying to manage multiple accounts.
Furthermore, keeping old 401(k) accounts open may not align with an individual’s current financial goals and risk tolerance. By consolidating accounts, individuals can ensure that their investment strategy is aligned with their current stage in life.
To consolidate 401(k) accounts, individuals can start by listing each account and determining where they want to move them. They can then contact the plan administrator to initiate a direct transfer to their new plan provider.
Overall, combining 401(k) accounts can lead to lower fees, easier management, and a more aligned investment strategy, ultimately helping individuals better prepare for retirement.