How Consolidating Accounts Can Save Your Retirement and Estate Plans

It’s that time of year for sunny mornings, luscious blooms, and hauling out the cleaning products—spring is in the air.

Spring cleaning gives people an opportunity to dust off the dreary winter days and ring in a new season of life. But perhaps one of the most underrated byproducts of springtime is discovery.

Think back to spring cleaning your office and all the random elements you discovered—the receipt lost in the folds of your drawer or the old photo of you and your kids on a family vacation, perhaps your favorite pen that’s ink has long dried up.

Some finds are hidden treasures, whereas others are simply taking up precious space. It’s time to purge the unnecessary clutter in your life and make room for more organization and clarity.

This intentional discovery process can also be applied to your financial life. Depending on where you turn, you could find an old 401(k) account here, an expired life insurance policy there, a separate investment account in another space—the list goes on and on.

These old accounts aren’t just simple clutter you can shove to the back of your drawer, they can actually become a roadblock for future financial success. Ready to ditch your financial hoarding and deep clean your money?

Save Time, Money, and Heartache By Consolidating Your Financial Accounts

Consolidating is simply combining multiple entities into a single point. The goal is to streamline and declutter, making processes more efficient.

Think about this idea in terms of your TV streaming services. Do you really need premium accounts for Netflix, Hulu, HBO, ESPN, Prime, and likely several others? Probably not. You can look at the ones you get the most value out of, and consolidate the rest.

From a financial perspective, consolidating could mean anything from bank accounts to investment accounts to long-lost insurance policies. Varying accounts can lead to financial chaos especially in retirement and estate planning.

The Top Reasons Consolidating Boosts Your Retirement Plan

Trimming the number of retirement accounts you have can increase your nest egg. Let’s take a look at some critical benefits of combining retirement accounts.

Youmay pay fewer fees

Investment accounts always come with fees—management, accounts, maintenance, expense ratios, and more. When you consolidate your accounts, you may experience decreased fees as you’ll have fewer institutions that hold your money.

Better control over required minimum distributions (RMDs)

Once you turn 72, you’ll need to take RMDs from most retirement accounts (excluding Roth IRAs). If you forget or withdraw too little, the IRS sticks you with a 50% penalty. Itmay be simpler to take your RMDs from two accounts as opposed to five or more each year!

Offers a birds-eye-view of your investments

When your investments are in one or two places, you can more easily manage your funds. It makes routine maintenance like rebalancing more efficient as well.

When you shouldn’t consolidate retirement accounts

Consolidation isn’t all minimalist bliss, there are some compelling reasons to maintain separate retirement accounts.

Different retirement accounts carry different benefits
- It’s important to weigh the benefits of each account before combining them together. Let’s say that you’re moving companies and want to roll over your old 401(k). One option is to roll the balance into the 401(k) with your new employer, but if the investment options aren’t as robust and the fees are a bit high, it might serve you to roll the funds into an IRA instead. Even though it’s another account, it could help you save more money in the long run.
Consider your tax situation
- Each retirement and investing account is taxed differently. It may be important to have a mix of tax-deferred (401k and traditional IRA), taxable (brokerage account), and tax-exempt (Roth) accounts to give yourself more freedom and flexibility to build a tax-efficient income plan.
You’re planning to retire early
- Most retirement accounts have early withdrawal penalties if you take out funds before 59 ½. Your employer plan may allow you to take penalty-free partial withdrawals from a 401(k) if you fully retire by 55, something that wouldn’t be possible with a traditional IRA, for example.

Each of these situations is unique to you and your goals. Before consolidating all of your accounts, work with your financial advisor to see which ones will benefit you most in your golden years.

Your retirement plan isn’t the only place where consolidation comes in handy. Estate planning is infinitely smoother with a streamlined plan.

Why Consolidating Simplifies Your Estate Plan

Consolidating accounts revamps your estate planning process, making the process much simpler for you, your pros, and your heirs. Let’s take a look at a hypothetical client example.

Say there are two separate clients, John and Joe. Both have estates worth about $2 million. Between his investments, insurance, and other financial accounts, John had 5 different financial custodians. This rather reasonable number made it simple to update beneficiaries and asset titling, giving John a realistic sense of the value of his estate. It also made tax planning easier and allows for a more seamless transition to heirs.

Joe, on the other hand, spread his money across nearly 30 financial institutions. This vast range of providers makes it difficult to ensure that the assets are titled properly and that the beneficiaries are updated. It also makes the financial impacts of his estate that much more complicated—values of each account, tax filing and planning information, goals, etc. Not to mention, the extra time, stress, and cost just wading through all of that information will cost him and/or his family.

Consolidating can drastically impact the value of your estate by:

Keeping organized, diligent records
Less time sorting through paperwork
Decreased stress
Fewer billable hours
Ensuring proper asset titles
Decreased chance for prolonged probate
More tax planning (and tax-efficient) opportunities

An Advisor Can Help Declutter Your Financial Life

Over the years, it’s easy to let financial accounts pile up like dust on a high ceiling fan. But consolidating and streamlining your accounts can restore unity to your financial plan.

Even though the process sounds simple, consolidating isn’t as easy as merging accounts together. You should consider the benefits of each account, fees, taxes, and more before making any final decisions.

At Legacy Wealth, it’s our mission to help you use your financial resources in meaningful and fulfilling ways. Ready to spring clean your accounts and take a deep breath of fresh air? Schedule a 15-minute call with our team today.

Disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.