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Consolidating Your Retirement Accounts with ESG Investments

Consolidating Your Retirement Accounts with ESG Investments

November 02, 2020

Once you have a clear picture of your priorities - that is your values, goals and high leverage activities - organize around them.

-Stephen Covey

Organization is one of the pillars of achieving any financial goal, this is true when it comes to retirement planning. There are many benefits to consolidating your retirement accounts, particularly as you get closer to retirement age. The most obvious reason for consolidating your retirement accounts is that it is easier to manage your accounts when they're all together. You don't have to worry about forgetting about that old 401(k) from your first job 20+ years ago.  However, there are many other potential benefits of consolidating your IRAs, 401Ks, 403bs and TSPs into one account. Here are four important reasons to consolidate your retirement accounts:


Investment options (ESGs)

One of the biggest advantages of rolling over an old employer sponsored retirement account into an IRA is that you have the potential for far more investment options to choose from. 401ks, TSPs, 403bs all have a set number of investments and many of them are limited to a hand full of core investments.

If you want access to other market niches—say, ESG or socially responsible funds, emerging market stocks, or real estate investment trusts—an IRA may allow you to invest in thousands of funds and ETFs, as well as individual bonds and stocks.  ESG or Socially Responsible funds are starting to pop up on more retirement plans, but the options are limited, and most plans do not offer ESG funds. If you want the most options, then an IRA is probably a good choice for you.


Unified investment strategy- Having multiple different accounts spread out among various custodians can make it difficult to manage your investments according to your risk profile and goals. Furthermore, as you age and get closer to retirement your risk profile will probably change and you will have to readjust how your assets are allocated. This is easier if you can see everything in one place.


Beneficiaries: It goes without saying that if something happens to you it will be much easier for your beneficiary or beneficiaries to deal with one consolidated account rather than having to track down accounts in numerous places. 

Additionally, we often see older retirement accounts with beneficiaries that are not up to date. If you had a major life event, such as marriage, divorce, birth, or adoption of a child, you would want to make sure that your beneficiaries are correct on your older accounts. Having only one or two retirement accounts makes it easier to keep track.


Withdrawal strategies and taxes:

Handling withdrawals from several accounts in retirement is like trying to herd cats. Consolidating accounts under one brokerage or fund company can make managing withdrawals and tax record keeping easier.

Additionally, if you withdraw money from your IRA or 401(k) before age 59½ you may be charged a 10 percent penalty. There are certain exceptions. For example, you can withdraw money from an IRA penalty-free if you use the funds to pay for college tuition. You can also use up to $10,000 to help with a first-time home purchase.

How to consolidate:

If you have accumulated multiple retirement accounts over the years, the first step is to try and list all your accounts and gather current statements, review the investments and beneficiaries. If that information is not listed, then you will have to call the investment company to obtain that information.  Consult with your financial advisor to decide if it makes sense to consolidate into one account and work on developing a strategy that works for you.

You should look at your retirement plan like an orchestra, there are many different instruments such as your retirement plans, IRAs, social security, taxes, and budgets all producing different sounds. It is only when you bring them all together like a conductor do they make beautiful music.

I have been helping clients consolidate retirement accounts for years. If you are not working with an advisor and do not know where to begin, making an appointment is the first step toward building a sustainable retirement.