Avoid Retirement Clutter

Follow these 3 tips.


Last week I attended the Retirement Income Solutions Summit here in Chicago. This excellent conference put on by Pensions & Investments Magazine highlighted a number of studies showing that an alarming number of retirement plan participants are largely unprepared for retirement.

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One issue that I encounter often in working with new clients is retirement plan clutter.

In the past, when a person worked for one company for his/her entire career, keeping track of his/her retirement plan was easy. In those days, a retirement plan generally meant a pension; and unless you worked in the pension department, you didn't have to do anything to manage it except show up for work. Upon retirement you would begin receiving your monthly pension benefits.  No need to worry about how this money was invested; all of the investment risk was on your former employer.

Today things are different. Pension plans are becoming a rarity. Many of us change jobs several times before retiring, leaving a trail of retirement nest eggs behind us.

[See 4 Options for Your 401(k) When Leaving Your Job.]

Now that defined contribution plans such as the 401(k) and 403(b) are becoming the main retirement savings vehicle, the responsibility for managing these accounts rests with the individual as opposed to the employer. It's important to monitor and manage your retirement accounts. But how can you do that if your accounts are scattered here and there? Here are a few tips:

Organize your records. As long as you continue to hold your account(s) in a former employer's plan, you should receive statements. Keep them all in a file and, more importantly, enter them all in a spreadsheet. I suggest categorizing by account and by asset class (large cap, small cap, etc.).  At a minimum, managing your retirement accounts means knowing how you’re diversified and the weighting of the different types of investments.

Consolidate your accounts. To the extent possible, consolidate these old retirement accounts.  Unless there is a compelling reason to leave an old 401(k) with a former employer, it will make monitoring your portfolio much easier to roll these accounts into a consolidated IRA. Likewise if you have several IRA accounts with various custodians. The same holds true for taxable accounts, annuities, etc.

Take a portfolio approach. View all of your investment holdings as part of a consolidated portfolio. Far too many retirement plan participants look at their retirement plan accounts, their IRAs, and their taxable holdings in a vacuum. This can make for under or over weighting in asset classes, overlap of holdings, and a portfolio that takes too much or too little risk. Your overall portfolio should be an outgrowth of your financial plan.

Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. He recently cofounded Retirement Fiduciary Advisors to provide direct investment and retirement planning advice to 401(k) plan participants. Follow Roger on Twitter and LinkedIn. Roger also blogs at Chicago Financial Planner.