Recent years have seen a job market unlike any other. The pandemic response changed the way we work and where, and these ongoing effects are being seen in the data.

Zippia reports that 37% of U.S. workers lost or changed jobs in 2020. The average tenure of a single employer is 4.1 years. 65% of American workers are actively looking for new full-time work.

Evidently, our generation isn't able to stay with the same employer throughout their lives and receive a pension like our grandparents and parents.

You have probably had to change jobs several times in your career. This means that you may have retirement savings with multiple banks or investment firms. If you have multiple IRAs or 401(ks throughout your career, you might be losing money.

The Government Accountability Office, which analyzed data from 2004 to 2013, found that approximately 25 million Americans had left money in a 401k account after they quit their jobs. According to data from the labor department, this equates to 37% of workers who are actively saving money through an investment plan at work.

Employers are enrolling more workers into 401(k), plans. Many may not realize that they are enrolled. This makes it more likely that employees will forget about their retirement accounts when they move jobs.

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You won't receive any information or updates about your retirement plan or account if you haven't updated your contact information with your employer. A new law allows employers to remove old accounts that have less than $5,000 from their plans, making it easier to lose your money.

Spencer Williams, President and CEO of Retirement Clearinghouse, stated that "from a consumer perspective the default should be 100% of time to move money [when switching jobs]," CNBC.

Consolidating accounts can bring you many benefits

Consolidating your retirement accounts can have many benefits, but these are the top.

1. It's easier to keep track of your money

It is futile to try to track multiple accounts that are linked to different employers. It's much easier to keep track of your investments and savings, and to manage your options. It is ideal to have one statement, one number and one password so that nothing slips through the cracks.

2. Lower Fees

Retirement plans often have investment, custodial and administrative fees. You could see a greater return on your investment if you have fewer accounts.

You may even have to pay fees based on how much assets you own. You may be eligible for a fee reduction if you combine your accounts. Your total balance could meet minimum asset thresholds if you combine them.

3. It makes things easier for your beneficiaries

Many people leave behind retirement accounts when they die. Having multiple accounts can make it difficult for loved ones to manage your estate. It is possible to consolidate accounts without having to track down multiple statements or contact multiple custodians.

4. Reduce the risk of missing minimum distributions

When you reach 72, the IRS will require you to withdraw a minimum amount from your retirement accounts. This is known as an RMD. You can be penalized up to 50% for not taking the minimum distribution. Multiple accounts can lead to multiple RMDs, which increases the chance of making costly mistakes.

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The Cons of Consolidating Accounts

Consolidating retirement accounts may not be the best choice for everyone. This could limit your investment options as well as your flexibility. Transferring your money to another investment may also result in fees.

It might not be a good idea to limit your investments to one account. Depending on how often and how much you contribute, it may be a good idea to have at least one 401k and one IRA.

What is the best thing to do for your retirement?

Because we all have different goals and needs, finances are very personal. It is a good idea to create a monthly budget with your partner and family. A professional can help you understand your options and give guidance as you weigh your options.

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By: Perry Carpenter
Title: The Surprising Reason You Should Be Consolidating Your 401(k)s And IRAs
Sourced From: www.suggest.com/consolidating-401ks-iras-benefits/2681214/
Published Date: Sat, 15 Oct 2022 12:45:00 +0000

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