When To Rollover

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If you’re like me and have made several career moves already, you probably have a lot of money sitting around in different places. In my earlier years of investing, I never thought anything of if.. the more brokerage accounts I have the more diversified I am, right? Aside from the ease in having all of your money in one place (receiving one statement, the ease that comes with filing taxes, etc) there are several disadvantages to having several accounts:

The most dreaded word when it comes to investing:

FEES

Most brokerage accounts charge a custodial fee which is the cost of “maintaining” your IRA account. In the long-run these can really add up if you’re paying them on multiple accounts. It is usually better to bite the bullet and pay the termination fee that often comes with transferring your funds and reap the reward of fewer fees down the road.

HIGH COST

It is true that many employer-sponsored retirement plans are high-cost options for investors. Like most insurance plans, and other employer sponsored programs, they are looking out for themselves; what costs the least for the company.

There are some benefits that come with owning multiple IRA’s that pertain to assigning beneficiaries and withdrawing. Additionally, there is some legal protection that comes with owning multiple accounts in the event that you find yourself in court. Each type of plan is protected differently in various types of legal situations, so there may be some advantages in not having all of your eggs in one basket if you find yourself face to face with the law.

But if you’re young like me these factors are (hopefully) negligible as I have a long life ahead of me and will probably switch jobs and accumulate a few more accounts before it’s time to withdrawal.  There are obviously a lot of “what-ifs” at play here. Such as “What if my previous employer is one of the few with a great selection of low-cost funds?” Hopefully  your employer sponsored plan has plenty of information available to you to sort out these kinds of questions and find out what works best for YOU. The rest is up to your particular place in life and your risk tolerance.

In my case, I am already too diversified. I can hardly keep track of all of my accounts. Rolling over two of my high-cost accounts into low costs options such as Vanguard will save me in the long-run without giving up certain legal protections and advantages(if I even need them). If I’m wrong, I have 20+ years to adjust and figure out what works best for me. Ah the beauty of being young.

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