Believe it or not, many people leave their old retirement funds behind. Whether its a partially earned pension or a 401k plan left at an old employer, many people lose the benefits of consolidation and growth that could have been attained if they had consolidated that money with their primary retirement accounts. Here are a few examples of how this could happen and some ways to help fix the problem:
Old 401k Plans
Many people believe that when they leave their employer that they should leave their 401k plan there also. That is a common misperception. In today’s online investing world, you can easily transfer your employer’s 401k plan, using a rollover account, to any online or discount broker. Not only will this save you investment fees for years and years, it will also allow you to invest the money in ANY funds you see fit. If you leave the funds at your old employer you are less likely to monitor the investments, and you are even likely to forget about the funds over time – especially if the amount there is small. Rolling the money into an account with other retirement investments can help solve both of these problems.
Pension Plans at Previous Employers
Although pension plans have gotten more rare these days, they still exist for millions of people worldwide. Sometimes, when you leave a company they will keep your pension account there until you retire. This is another way of leaving your retirement funds unattended. If possible, ask them for a lump sum payment, especially if the dollars are somewhat insignificant. Then, take this payment and transfer to your brokerage and add it to your other retirement funds. Of course you’ll have to look up the best way to do this without having to pay any penalties for early withdrawal, so check with the authorities in your location.
Forgotten Superannuation Accounts
In Australia, a type of retirement account called an superannuation account is required by law to be funded at each employer, but funded mainly by the employee. In fact, over the years, many people have accumulated some money (or superannuation) in multiple retirement funds. This occurs when a person relocates, changes jobs or just happens to change their retirement funds. All the money is sitting there in various funds, and even though it may only be a couple of hundred dollars – that’s a few hundred dollars which could potentially be earning you a lot more in the grand scheme of things. There are many institutions and government bodies that help you find what is rightfully yours so you can maximize your retirement nest egg and help get ready for retirement.
One last thing you can do to make sure that you get the benefit of all of your retirement funds is to keep track of them. Not only should you keep a list of all your financial accounts for yourself, you should share that list with whoever will handle your estate planning, trust, or will. And make sure all of your accounts are updated with current beneficiary data or they could end up getting distributed based on laws and not your will. Ultimately, its up to you to account for and manage all of your retirement accounts.