Why you should consolidate your retirement accounts!
The way things in our economy work today many people end up working for multiple corporations during their work life. In most cases each of those employers offered company matching funds with the 401k they provided for their employee’s. Then as a result of changing jobs your 401k’s can get left behind and that is not good for your financial future. Stop for a minute and think about the true benefits of a corporate 401k plan:
- You actually save for retirement,
- The money accumulates because you can’t permanently take it out without paying taxes and possibly a 10% penalty.
- Your savings grow much faster due the matching funds your employer provides.
The downside of most 401k is they offer only a few different types of funds to invest in and sometimes your matching funds are automatically invested in company stock. When you leave the company don’t leave your 401k behind, move it to an IRA where you can greatly diversify your investments and add more savings to it over time. Having multiple 401k’s plans is not a good diversification of your investments and could keep you from actually retiring on time, we believe it is wise to consolidate 401k’s, you hold with old employers, into a single IRA.
There is an old saying that says don’t put all your eggs in one basket and that is solid advice if you only have a couple of baskets, but an IRA is an account that can contain a great variety of investment vehicles (baskets) within a single account. As you change employers don’t leave you retirement money stranded in your old 401k plans, consolidate them into a single IRA account.