Welcome to the 22nd issue of Metrix that Matter, a weekly newsletter from WEALTHMETRIX that helps you focus on what matters most for building and sustaining wealth. Every Saturday, we share an educational essay with actionable takeaways to guide you on your journey to financial independence.
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What you’ll learn in this issue:
- Why having too many accounts works against you
- The 10 steps required to manage each account properly
- How to consolidate without losing benefits
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You have three old 401(k) plans from previous jobs. A Roth IRA somewhere. Multiple brokerage accounts with different advisors. A couple savings accounts you inherited from your parents.
Some hold mutual funds. Others have individual stocks you bought and forgot about. Yet others are just cash, sitting there, doing nothing.
With your accounts all over the place, you have logins you can't remember, statements scattered across different inboxes, and no clear picture of what you actually own or whether any of it is working together toward your goals.
Sound familiar?
This is an all-too-common situation. Even families who are doing “well” financially may not feel like they are because they don’t have a clear picture.
Sometimes, to improve your finances, you may just need to simplify things.
But before you can simplify, you need to understand what’s required to manage each account well. This is where most people underestimate the work involved.
What each account needs
To successfully manage accounts, there are at least 10 steps you need to follow:
Initial Setup
- Properly register each account with the right ownership structure (individual, joint, Traditional, Roth, etc.)
- Establish primary and contingent beneficiary designations
- If you will be contributing to or withdrawing from the account regularly, establish link to bank account and set recurring schedule for money movement
Invest the Account
- Select an overall investment allocation mix (percentage of stocks, bonds, cash) based on your goals, needs, and risk tolerance
- Invest the account (ETFs, mutual funds, individual securities) based on your selected allocation
Ongoing Maintenance and Evaluation
- Rebalance the account at least annually to ensure you don’t stray too far from your original allocation
- Evaluate investments against appropriate benchmarks and replace those that are not accomplishing intended objectives
- Adapt investment strategy as goals and needs change
Year-End
- Gather tax statements at the end of the year to potentially report on your tax return
- Look at next year’s contribution limits for retirement accounts and adjust accordingly
Multiply these 10 steps by 20 accounts, and you’re looking at 200 decisions to make and maintain. That’s not a financial plan. That’s a part-time job.
The good news is most people can consolidate down to a handful of accounts without losing any real benefit.
How to streamline your accounts
So, how do you make that happen? You develop a plan to get organized.
Start by creating a list of all your accounts, then look for common registrations. If you have multiple individual accounts, Traditional IRAs, or Roth IRAs with the same registration, they can typically be consolidated into one account without liquidating the holdings. Employer retirement plans like 401(k)’s and 403(b)’s work differently though. Those must be liquidated before rolling into another plan or IRA.
With any consolidations, you need to consider a variety of factors: investment options, fees and expenses, level of advice and support you receive from advisors, and the features and benefits of certain account types over others.
The goal is to have the right accounts, managed well, working together toward your goals. When you can see everything clearly in one place, you'll make better decisions, feel more confident about your progress, and spend less time worrying about what you might be missing.
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Need help?
Thank you for reading. Streamlining your finances is simple in theory, but can be challenging in practice. If you would like help developing a plan to simplify your financial situation, I invite you to schedule a complimentary 30-minute call. We'll discuss your current situation, explore your goals, and determine if there's a good fit to work together.
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WEALTHMETRIX
https://www.mywealthmetrix.com/
(972) 267-7526
102 S. Goliad Street, Suite 101
Rockwall, TX 75087
16475 Dallas Parkway, Suite 840
Addison, TX 75001
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