Retirement savings question..

[Birdie dog]

I currently have two sizable retirement accounts plus one that's really small and just hanging out there. The first one is the one I routinely contribute to. The second is about 1/4 of the size of the first but still a sizable amount of money ( more than many people's annual salary). Should I combine these accounts? Will compounding interest make a huge difference if I have one large chunk of money instead of a large and a not as large? I am going to make an appointment with a retirement planner but am pretty clueless about these sort of things. I'd love some opinions. Thanks.

 

[georgina]

I currently have two sizable retirement accounts plus one that's really small and just hanging out there. The first one is the one I routinely contribute to. The second is about 1/4 of the size of the first but still a sizable amount of money ( more than many people's annual salary). Should I combine these accounts? Will compounding interest make a huge difference if I have one large chunk of money instead of a large and a not as large? I am going to make an appointment with a retirement planner but am pretty clueless about these sort of things. I'd love some opinions. Thanks.

Well that really depends on what they are invested in, but often no, combining them would not automatically increase your returns. Some places like Vanguard do charge lower expense fees if you have more money in a fund. I like to combine funds for simplicity if they are in the same type of investments. You mention interest, are your retirement funds in cash and not stocks? How old are you?

 

[Birdie dog]

My larger account is a 403B account. It's stocks. The second account, through Fidelity is something different. I truly don't really know what it is. My smaller account was, at one point, a vested state retirement account. However, in 2008, when the recession hit, I was sent a letter that even though I was vested and would get my state retirement, I would no longer accrue interest on the account (I'd changed jobs to a non state job but left the account intact). With the inability to accrue interest, I pulled my money.

 

[runwad]

I guess your mileage may vary, but I found once I started getting a decent chunk of change in my 401k it really started rolling and growing. In my experience, I'd say, YES! more money grows faster than smaller amounts. Of course you do have to pay attention to fee's and all that!

 

[amcnj]

If you had two accounts both earning the same rate of return, you will earn the same total amount regardless of how much money is in each account. Now, if one account has lower fees/better returns, then having all the money in that one would make a difference. The additional income per year would be what you can earn in the new account minus what you would have earned in the other account.

 

[georgina]

Hopefully your retirement planner can help you sort through things. Be cautious if they try to get you to move everything to something they can manage for you. Ask a lot of questions!

 

[Nebraska_Disney]

Give the folks at Vanguard a call and they can walk you through the process. You also need to find out what is in your Fidelity account. My wife has changed jobs a few times and we took her 401K and rolled it over directly to Vanguard when she quit. We then selected the funds we wanted with the rolled-over money. Depending on your age and your investment strategy, you need to have a good mix of stocks and bonds as well as diversification of large, mid, and small cap funds along with some international exposure. There are single funds which can do this (Vanguard Wellington for example) or there are date based funds which are set up based on your target retirement date. One thing Vanguard asked me when I was rolling over accounts with them is if I wanted to combine them or keep them separate. I kept them separate for now, but can always combine them as I need to. If you have a pot of money earning interest, it is going to be equal to the same pot of money, split 5 ways, earning interest (dependent upon fees you are paying, of course). You do not need to pay anyone to do this for you, as it is really straight forward and the places you would put these funds are used to doing them. Vanguard Index funds are great low cost options for long-term investments. I swear by them as I am 46 and have a million dollars in my Vanguard accounts right now. Compound interest is your friend when you are receiving it vs paying it !!!

 

[QueenIsabella]

I agree that you should talk to someone who can look at the actual accounts. Whether or not you combine them, they need to be balanced, investment-wise, for your age and investment style (some people are more aggressive, others, more cautious).

Also, some accounts cannot be combined. For example, you can't combine an inherited IRA with your personal IRA. But--you can be balanced across the two.

You also want to make sure that you keep track of them both. It sounds ridiculous, but back in 1990, my FIL died. My MIL "misplaced" an account worth $350k. Seriously. At the time, I thought, "How in the world do you lose track of that kind of money?" But then, time goes on, MIL died a couple years ago. She was a savvy investor who believed she left the breadcrumbs very close together. Despite that, DH/BIL spent close to 2 years detangling everything. Now, I can understand more clearly how someone could lose track of an account. Still scratching my head over the size of the one she lost, but I get it now.

 

[bluehen]

It would depend on whether you are paying fees on the accounts. You may save money by combining.

 

[clh2]

Our financial planner (fee only) recommends having a diversified portfolio, within a family of funds, such as vanguard or fidelity.

It sure makes it easier to keep track of things, for rebalancing, total balances etc.

 

[HeightRequirement]

I currently have two sizable retirement accounts plus one that's really small and just hanging out there. The first one is the one I routinely contribute to. The second is about 1/4 of the size of the first but still a sizable amount of money ( more than many people's annual salary). Should I combine these accounts? Will compounding interest make a huge difference if I have one large chunk of money instead of a large and a not as large? I am going to make an appointment with a retirement planner but am pretty clueless about these sort of things. I'd love some opinions. Thanks.

No difference since returns as measured as % rather than by $ value. 10% of $50 plus 10% of $75 = $12.50. 10% of $125 = $12.50. Same return amount. As others have said, you may save money on fees if you can combine the accounts based on their classification. Managing one account instead of two could also be easier.

 

[MrsPete]

As a general rule of thumb, diversity is your friend. If one account should experience a downturn, your other account would still be intact. And how much "work" is it keeping track of multiple accounts?

 

[QueenIsabella]

As a general rule of thumb, diversity is your friend. If one account should experience a downturn, your other account would still be intact. And how much "work" is it keeping track of multiple accounts?

It can get to be work, let me tell you! When it was just our money, no biggie--we had a few accounts (checking, money market, mid-range, retirement, UTMAs for the kids). Then, DH's mom died. He inherited 7 IRAs, a 529, a trust management account, 2 life insurance trusts (one with each of our 4 children needing separate accounts), a regular bank account, and a few other assorted accounts. Some of these items can (and have been) combined, but some have to stand alone. Both the trust management account and one of the IRAs have individual stocks in them, which just adds to the complexity. Bottom line, he made the Spreadsheet of Phenomenal Cosmic Power, so that he can track all this stuff. We provide copies regularly to both our financial planner and our accountant. We also review them with our adult children--we have 2 adults and 2 minors. With the minors, we're a little more circumspect about actual figures--to a 13yo, $100 sounds like a lot of money, and I don't need him thinking we're the Rockefellers, because we're not.

 

[MillauFr]

I would just contact Fidelity or Vanguard. Fidelity has planners that can help you figure out your goals and guide you accordingly.

 

[Anthony1971]

To start with if you do not know what you have no one can give any type of advice.....
First step is to call both... find out what they are and the ability to roll them over as with 401B you may not be able to add outside money.
I know years ago and maybe still there were 401B's that actually guaranteed a certain rate of return which was a great deal....
your money will not grow faster combined or not period but one plan may be better than the other and have a higher rate of return but that is by far not a guarantee as that plan can also have a higher rate of loss when the market goes down unless it is just an interest account paying X percent period.

 

[makthompson]

If both accounts are invested the same way, then it wont make a difference, the math is the same.