The Benefits of Consolidating Your Investment Accounts

Written by Canty Financial - Published on June 26, 2024

We frequently hear from clients who have a few scattered investment accounts or old employer retirement plans that they’ve left behind. These accounts often end up spread across different institutions, causing stress and concern about potentially forgetting about them and leaving money unclaimed. Managing multiple accounts can become overwhelming and stressful, but consolidating your investment accounts can provide significant benefits, helping you optimize your financial strategy and gain peace of mind. Here’s why you should consider consolidating your investment accounts.

Simplified Management and Tracking

One of the most significant advantages of consolidating your investment accounts is the simplification it brings to your financial life. With all your investments in one place, it becomes much easier to track performance, monitor asset allocation, and make informed decisions. You no longer have to log into multiple accounts to get a comprehensive view of your financial health. Instead, a consolidated account provides a holistic picture, allowing for more straightforward management and oversight.

Reduced Fees and Better Service

Maintaining multiple accounts often means incurring multiple sets of fees. These can include account maintenance fees, trading fees, and advisory fees. By consolidating your accounts, you can reduce or eliminate many of these redundant fees. Additionally, many financial institutions offer lower fees or additional services for larger account balances, so combining your investments can make you eligible for higher-quality service levels.

Optimized Investment Strategy

Consolidating investment accounts allows for a more cohesive and optimized investment strategy. When your assets are spread across different accounts, it can be challenging to ensure that your overall portfolio is properly diversified and aligned with your risk tolerance and financial goals. Consolidation helps you create a unified investment plan that takes into account all your assets, ensuring a balanced and well-coordinated approach.

Easier Rebalancing

Regularly rebalancing your portfolio is essential to maintaining your desired asset allocation and risk level. However, rebalancing can be complicated when dealing with multiple accounts at different institutions. Consolidating your investments makes it much easier to perform this crucial task. With all your assets in one place, you can efficiently rebalance your portfolio, ensuring that it remains aligned with your long-term objectives.

Simplified Tax Reporting

Tax season can be stressful, especially if you have to deal with multiple account statements and tax documents. Consolidating your accounts simplifies tax reporting by reducing the number of forms you need to manage. A single consolidated account provides a unified statement, making it easier to track your taxable events, such as capital gains and dividends, and ensuring accurate and efficient tax filing.

Enhanced Financial Planning

Working with a financial advisor becomes more effective when all your investments are consolidated. Advisors can provide better, more comprehensive advice when they have a complete view of your financial situation. Consolidation allows your advisor to develop a more personalized and strategic financial plan, tailored to your unique needs and goals. It also facilitates more effective communication and collaboration between you and your advisor.

Increased Confidence and Peace of Mind

Finally, consolidating your investment accounts can provide you with increased confidence and peace of mind. Knowing that all your investments are organized and managed under one roof reduces the stress and uncertainty associated with managing multiple accounts. It allows you to feel more in control of your financial future and ensures that you are not leaving any money behind or forgetting about any accounts.

How to Consolidate Your Investment Accounts

Consolidating your investment accounts can seem like a daunting task, but it’s a straightforward process when broken down into manageable steps. Here's how you can roll over your old employer 401(k) and consolidate IRAs and brokerage accounts.

Rolling Over Your Old Employer 401(k) or 403(b)

  1. Contact Your Old Employer’s Plan Administrator: Reach out to the plan administrator or HR department of your former employer to inform them of your intention to roll over your 401(k).
  2. Choose Your Destination Account: Decide where you want to roll over your 401(k) funds. Typically, this will be an Individual Retirement Account (IRA) due to the flexibility and variety of investment options available.
  3. Complete the Rollover Paperwork: Obtain the necessary rollover forms from your old employer. Complete these forms, ensuring all information is accurate.
  4. Direct Rollover: Request a direct rollover, where the funds are transferred directly from your old 401(k) plan to your IRA. This method avoids potential tax penalties and ensures your funds are not counted as a distribution.
  5. Confirm the Transfer: Follow up with both institutions to confirm the rollover has been completed successfully. Ensure that all funds have been transferred and properly invested in your new IRA.

Consolidating IRAs and Brokerage Accounts

  1. Identify Accounts for Consolidation: Make a list of all IRAs and brokerage accounts you wish to consolidate.
  2. Choose a Primary Institution: Decide which financial institution you want to use for your consolidated accounts. Consider factors such as fees, investment options, and service quality.
  3. Complete Transfer Forms: Obtain transfer forms from the institution where you plan to consolidate your accounts. Fill out these forms, providing details of the accounts to be transferred.
  4. Submit Forms: Submit the completed transfer forms to the receiving institution. They will handle the process of transferring your funds from the existing accounts to the consolidated account.
  5. Monitor the Transfer: Keep an eye on the transfer process, ensuring that all funds are moved correctly and that your investments are allocated according to your strategy.

Conclusion

Consolidating your investment accounts offers numerous benefits, from simplified management and reduced fees to optimized investment strategies and easier tax reporting. It enhances your ability to maintain a well-balanced portfolio, work effectively with your financial advisor, and ultimately achieve your financial goals. If you have multiple investment accounts, now is the time to consider consolidation as a strategic move towards a more organized and efficient financial future.

At Canty Financial, we are here to help you navigate the consolidation process and create a streamlined, effective investment strategy tailored to your needs. Contact us today to learn more about how we can assist you in consolidating your investment accounts and optimizing your financial plan.

Thank you for reading,
The Canty Financial Team

Bill Canty, CFP®, CPA, Financial Planner

Ed Canty, CFP®, Financial Planner

Joe Canty, CFP®, Financial Planner

Tina Alteri, CPA, Tax Advisor

Maureen Walsh, EA, Tax Advisor

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