Streamlining Retirement Accounts—Less Can Definitely Be More When was the last time you met someone who has worked for one employer for his or her entire career? If you can’t remember, you’re not alone. In fact, recent data compiled by the U.S. Department of Labor indicates that wage and salary workers have averaged just four years with their current employer. Not surprisingly, older workers tend to have more years of tenure than their younger counterparts. For example, employees between ages 55 and 64 have 9.3 years of tenure—about three times that of workers between ages 25 and 34, who have 2.9 years.1

If it is common for today’s work force to switch jobs voluntarily or involuntarily, what is the side effect of this cultural shift? For starters, many people find that they have retirement plan accounts and IRAs scattered among multiple custodians, such as banks, investment companies, and former employers.

It’s challenging to keep track of assets that are so widely scattered. If you find yourself in this position, regardless of how many accounts you have and where they’re held, you may want to consider the benefits of consolidating your retirement assets.

Simplify your IRAs and retirement assets through consolidation.
Whether you have a 403(b), 401(k), 457 plan, your own IRA, or some combination thereof, you may find that consolidating your retirement assets into a single account is a good choice if you want to:

Avoid paying multiple custodial fees.
Many mutual fund companies and brokerages charge an annual fee of $10 or more on IRAs worth less than $5,000. If you transfer all your IRAs into one retirement account and add in your old 401(k), you may have a big enough balance to earn a fee waiver.

Simplify tracking on one statement.
If all your retirement assets are in one place, you’ll find it easier to monitor your progress and investment results. You’ll receive a single statement that eliminates the need to keep track of multiple accounts from a variety of sources. You’ll also have the benefit of accessing your information through one website and one phone number.

Get a clearer picture of your asset allocation.
With a full view of your retirement picture, you are more likely to receive appropriate guidance whenever you think allocations should change or investment opportunities should be considered. Plus, if you have an old 401(k) that only offers expensive, underperforming mutual funds, you‘ll have the chance to roll it into an account that offers a variety of investment choices to help increase your bottom line.

Manage risk exposure.
With several accounts invested in different funds, you may become over-invested in certain sectors or companies through overlapping investments. With one consolidated account, you can more easily track underlying investments and manage your risk exposure.

Simplify your required minimum distribution (RMD) calculations.
When you reach age 70½, you must begin taking RMDs from IRAs and other retirement accounts, such as a 401(k)s. It’s typically easier to calculate and take withdrawals from a single account.

Do your homework before taking action.
For many people, consolidating their retirement assets makes life easier and provides financial comfort. To avoid costly mistakes, however, be sure you fully understand each retirement account you own and the tax rules that apply to it before doing anything. Keep in mind the following:

Review your current holdings.
If you have worked for awhile, this process may take some time, but it is important to have a clear picture of all your accounts. You should determine where each account is located and what it is worth.

Avoid hidden charges or fees.
Some financial institutions charge egregious fees to let you go. Consolidate only if the payoff outweighs any fee. Some firms may assess charges, such as service and transaction fees, on some or all of your assets when you roll them over.

Avoid directly receiving a check.
Have all the retirement assets from another firm sent directly to the new account, in what is called a direct rollover. A direct rollover allows you to preserve your entire accumulation without having taxes withheld from the funds you are moving. Always remember that you should never take possession of the money. If you do and then fail to reinvest it in an IRA within 60 days, you’re looking at an income tax bill, as well as a 10-percent early withdrawal penalty.

Even if you’re far from retirement at this point in your career, starting to consolidate your assets now may help you in the long run to develop an effective overall financial plan that provides the maximum benefit to you and your family. A financial professional can provide more information on consolidation and help you determine if it may be a good choice for you.

1. Bureau of Labor Statistics of the U.S. Department of Labor, Current Population Survey (CPS), January 2006.

Labels: accounts, assets, diversification, retirement

  10:18 AM •  0 Comments •

Cutting Energy Costs Benefits Wallet As gas and home energy costs continue to rise this summer, curbing them becomes increasingly important to your financial health.

Recently, I was buying gas at one of those rare stations that does not have self-serve pumps. As the attendant was filling my tank, I noticed several people just getting $5 or $10 worth of gas. "This is the fourth time this woman has been here this week," said the attendant, after she handed him a $10 bill. The attendant has worked there for more than 10 years and has noticed a change over the last year. "You would not believe how many people do the same thing…it was never like this,” he said.

While we cannot control gas prices, we can control gas mileage and reduce costly trips to the pump. The Alliance to Save Energy offers some tips:

■ Maintain your vehicle. Replacing a faulty oxygen sensor can improve mileage by up to 40 percent.

■ Keep tires properly inflated. This improves gas mileage by about 3.3 percent, increases safety, and prolongs tire life.

■ Don’t Speed! Speeding, rapid acceleration and braking can lower gas mileage by 33 percent at highway speeds and by 5 percent around town.

■ Buy, lease, or rent smart. Select a model with good fuel economy. Check www.fueleconomy.gov for information on fuel efficient vehicles.

■ Tune up on time. Fixing a car that is noticeably out of tune, or has failed an emissions test, can improve gas mileage by an average 4 percent.

Another way to save money is by conserving energy at home. Here are some ways to do that:

■ Watch the temperature. Changing your thermostat settings by a few degrees makes a big difference on your energy bills. You can save up to 10 percent a year with a programmable thermostat that automatically adjusts the temperature by 10 to 15 percent for the hours that the house is unoccupied.

■ Use fans. A ceiling fan can lower room temperature allowing you to turn down the air conditioner.

■ Audit your home energy. Have a qualified firm do a home energy audit. A professional will inspect your home and probably find some surprising things. The cost is reasonable, especially if your energy company picks up part of the tab.

■ Shift energy-intensive tasks. Use your washing machine, dryer, and dishwasher during off-peak energy demand hours. This also increases electricity reliability during heat waves. Do full loads when you run appliances.

■ Turn off your computer. Also, power down the monitor when you are done. Activate the “sleep” feature so the machine powers down when it’s on but not in use for a while. When you leave a room, turn off the lights and other energy using equipment.

Most important: If you are going to save on energy costs, everyone in your household must participate. Regardless of your financial situation, this sends a good message to your children and teaches them the importance of conserving energy and money.

Labels: electricity, energy, savings

  10:19 AM •  0 Comments •