By Aaron Cole, a.a.m.s.
If you’re like many people, you keep investment vehicles in different places. You might have started traditional IRAs with two or three financial-services providers while buying some stocks from still another. And you may also have purchased a fixed annuity from an insurance company. As long as you keep track of all these accounts, you might think it doesn’t matter where they are “housed.” However, if you scatter your investments here, there and everywhere, you could end up in uncharted territory when it’s time to pull everything together.
What are some of the potential problems of keeping your investments at a variety of different institutions? For one thing, despite your best intentions, you could actually forget about one or more of your holdings. State treasurers’ offices regularly advertise “unclaimed” property, including investments. People move, change jobs, divorce and undergo all sorts of changes in their lives – and sometimes, they leave their investment dollars behind. But if you consolidate all your holdings with one financial services provider, you can keep tabs on your investments without much trouble.
Of course, you could be a highly organized person – someone who would never “misplace” financial assets, no matter how dispersed. But, even so, your far-flung investments could slow your progress toward your important financial goals. If you maintain several different accounts, without a central focus or unifying philosophy, you could end up with redundant or inappropriate investments – a costly mistake.
On the other hand, consider keeping your investments with one firm and work with one financial professional – someone who knows your family situation, risk tolerance and investment preferences. – Doing this may help you make steady progress toward your long-term objectives. A qualified professional can look at how all your investments work together, and make recommendations, as needed, to help improve your portfolio’s performance within your stated level of risk.
Required Minimum Distributions Issues
Consolidating your various investment accounts can also help you in the area of required minimum distributions (RMDs). As you may know, you need to begin taking RMDs – from traditional IRAs and 401(k)s or other employer-sponsored retirement plans – in the year in which you turn 70-1/2. You can withdraw more than the RMD, but, as the word “required” suggests, you can’t withdraw less – and you could face tax penalties for taking less than the minimum or failing to take the RMD on time. Consequently, if you have multiple IRAs and employer-backed plans, you’ll have to “reel them in” at the right times to make sure you’re making the proper RMD moves.
If you do have several IRAs, from various providers, you’ll need to determine the RMD for each IRA separately. You may, however, choose to aggregate your RMDs for any given year from a single account. Again, though, you will find it much easier to track your RMD options if all your IRAs are “under the same roof.” Plus, your financial professional can help you decide if the aggregate RMD route is the one to take. (Your 401(k) or similar employer-sponsored plan cannot be aggregated with your IRAs to determine your RMD.)
So, there you have it – some reasons to consolidate your investment accounts. Consider taking this step soon to simplify your life.
Is it time to consolidate your assets?
By Aaron Cole, a.a.m.s.