What's the best way to manage all the 401K accounts I've accumulated from my past jobs?

Question

I should be managing my retirement money better and one problem is the number of accounts I have (4). Would it be better for me to consolidate and what's involved in doing so?

Answer 1

Open an investment account on your own and have them roll the old 401K accounts into either a ROTH or traditional IRA. Do not leave them in old 401k accounts and definitely don't roll them into your new employer's 401K.

Why? Well, as great as 401K accounts are, there is one thing that employers rarely mention and the 401K companies actively try to hide:

Most 401K plans are loaded with HUGE fees.

You won't see them on your statements, they are often hidden very cleverly with accounting tricks. For example, in several plans I have participated in, the mutual fund symbols may LOOK like the ones you see on the stock tickers, but if you read the fine print they only "approximate" the underlying mutual fund they are named for. That is, if you multiply the number of shares by the market price you will arrive at a number higher than the one printed on your statement.

The "spread" between those numbers is the fee charged by the 401K management company, and since employees don't pick that company and can't easily fire them, they aren't very competitive unless your company is really large and has a tough negotiator in HR. If you work for a small company, you are probably getting slammed by these fees. Also, they often charge fees for the "automatic rebalancing" service they offer to do annually to your account to keep your allocation in line with your current contribution allocations.

I have no idea why it is legal for them not to disclose these fees on the statements, but they don't. I had to do some serious digging to find this out on my own and when I did it was downright scary. In one case they were siphoning off over 3% annually from the account using this standard practice.

HOWEVER, that is not to say that you shouldn't participate in these plans, especially if there is an employer match. There are fees with any investment account and the "free money" your employer is kicking in almost always offsets these fees. My point here is just that you shouldn't keep the money in the 401K after you leave the company when you have an option to move it to an account with much cheaper fees.

Answer 2

I rolled mine over from the company I was at into my own brokerage house. You can't roll them into a Roth IRA, so I needed to setup a traditional IRA.

There is paperwork your old jobs can provide you. I had to put in some mailing addresses, some account numbers and turn them in. My broker received it, I chose what I wanted to invest it in and that was that. No tax penalty or early withdrawal penalty. The key to avoiding penalties is to have your past employers send the money directly to another retirement fund, not send a check to you.

Answer 3

I'd roll them all into one account, just for your own convenience. It's a pain to keep track of lots of different accounts, esp. since you need logins/passwords, etc for all of them, and we all have plenty of those. :)

Pick a place like Vanguard or Fidelity (for example), where you can find investment options with lower fees, and do the standard rollover. Once all the accounts are rolled into one, you can think about how to invest the stuff. (Some good investments require larger minimums, so if you have several old 401ks, putting them together will give you more options.)

Rolling them over is not hard, if you have paperwork from each of the 401ks. You might be able to DIY online, but I found it helpful to call and talk to a person when I did this. You just need account numbers, etc.

If you are moving brokerage accounts, you may need to provide paper documents/applications, which might require getting them notarized (I found a notary at my bank, even though the accounts I was moving from and to weren't at my bank), which means you'll need to provide IDs, etc. and get a special crimped seal after the notary witnesses your signature.