Unlocking Investment Gridlock: Four Methods to Liberate Tied-Up Finances in Your Portfolio
In the hustle and bustle of life, it's easy to lose track of financial accounts, especially retirement savings. According to recent statistics, there are about 29.2 million forgotten 401(k) accounts, holding approximately $1.65 trillion in assets [1]. To help individuals reconnect with their lost retirement savings, several resources are available.
The Department of Labor's Retirement Savings Lost and Found Database, the National Registry of Unclaimed Retirement Benefits, and the Department of Labor’s abandoned plan database are key tools for locating and consolidating forgotten 401(k) accounts [2]. These databases can help identify 401(k)s from previous employers, especially those from private-sector plans or unions.
Once you find your old 401(k)s, it's essential to consolidate and manage these accounts to maximize benefits. You can choose to leave the funds in the old employer’s plan if it offers low fees and strong investment options. Alternatively, you can roll over the 401(k) into an Individual Retirement Account (IRA) for potentially greater investment flexibility or roll over the funds into your current employer’s 401(k) plan if allowed [3].
There are also concierge services like Capitalize and Beagle that offer help to find old 401(k)s and assist with rollovers, making consolidation easier if you have multiple old accounts [3]. The new Department of Labor’s Lost and Found tool, launched under the SECURE 2.0 Act, simplifies the search, helping individuals reunite with retirement savings that may have been forgotten due to job changes or employer closures [4].
However, managing your portfolio isn't just about consolidating retirement savings. It's also crucial to avoid holding onto stocks that could put your portfolio at risk. Emotional attachment to a successful stock can lead to heavy exposure if the stock goes south. To get unstuck, one should look at their asset allocation using the tools and questionnaires provided by their 401(k) provider [5].
As you approach retirement, it's essential to re-evaluate your asset allocation and make adjustments to ensure it becomes less risky. Financial fragmentation, a term used by Jennifer Baick, VP, financial group at Mercer Advisors, refers to the accumulation of financial accounts that can make it difficult to manage and access one's money [6]. Baick encourages a lot of consolidation to minimize financial fragmentation if it makes sense to do so [7].
In conclusion, taking the time to locate and consolidate forgotten retirement savings can help maximize benefits and simplify management. Additionally, regularly reviewing and adjusting your portfolio can help mitigate risks and ensure your savings are working for you as you approach retirement.
References: 1. https://www.cnbc.com/2021/02/02/401k-accounts-lost-and-forgotten-how-to-find-them.html 2. https://www.investopedia.com/terms/r/rollover.asp 3. https://www.cnbc.com/2021/02/02/401k-accounts-lost-and-forgotten-how-to-find-them.html 4. https://www.forbes.com/advisor/retirement/401k-consolidation/ 5. https://www.investopedia.com/terms/e/emotional_investing.asp 6. https://www.mercer.com/our-thinking/insights/financial-fragmentation.html 7. https://www.mercer.com/our-thinking/insights/financial-fragmentation.html
- By utilizing resources like the Department of Labor's Lost and Found Database, renouned concierge services, and the new Department of Labor’s Lost and Found tool, one can engage in defi (definitive) investing of personal-finance by finding, consolidating, and managing forgotten 401(k) accounts.
- As one approaches retirement, it's crucial to not just focus on locating and consolidating forgotten 401(k) accounts, but also to regularly review and adjust one's portfolio to minimize financial fragmentation, ensuring investments in personal-finance stay effective and less risky.
