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Military Spouses & Dependents

Why Military Spouses Should Consolidate Retirement Accounts

2022-03-31

How many times have you started over? Military families move an average of every two to three years and, over the span of a 20-year career, this equates to a substantial amount of relocations.

For the career-minded military spouse, this not only indicates that you’ve had to “bloom where you’re planted” an average of seven to ten times, but it also may mean that you have multiple retirement accounts. Whereas your spouse held a singular TSP account for years, it’s possible that you have three or more nest eggs lingering from previous employers.

You’re not alone. Recently, Boston College’s Center for Retirement Research reported an estimated 24 million forgotten 401(k) accounts holding $1.35 trillion in assets, and another 2.8 million accounts left behind annually. Might one of those be yours?

Although it is possible to leave your money with a previous employer, it’s not the most advantageous plan. Whereas the military outlines procedures for servicemembers, military spouses are often left to figure much out on their own. Here is why you should consolidate your multiple retirement accounts.

Benefits of Consolidation

Having multiple retirement accounts can make it challenging to manage your retirement savings. It’s possible to lose track of your accounts altogether, and various institutions come with multiple fees, statements, and investment decisions

When you consolidate your retirement accounts, it becomes easier to:

  • Rebalance your portfolio. Over time, your needs and risk tolerance will fluctuate. Your initial retirement accounts may be allocated in a way that you’re now taking too much risk for your current life stage. The fewer accounts you have, the easier it is to rebalance your investment strategy.
  • Understand your returns. It’s complicated to establish your rate of return when you’re looking at various balances. When you consolidate your assets into one account, it facilitates understanding and monitoring the rate of return on your investments.
  • Minimize your fees. If you’re paying annual maintenance fees for multiple retirement accounts, this total could decrease by simplifying to a single account.
  • Reduce paperwork and simplify tax time. It’s easier to keep contact and beneficiary information up-to-date on one account than numerous accounts. Additionally, utilizing a tax-efficient investing strategy can be complicated when working with multiple accounts.

How to Simplify Your Retirement Accounts

When you consolidate, it simplifies the “big picture” of your retirement. You’re able to see whether you’re invested in appropriate funds, if your portfolio aligns with your current risk tolerance, and simplifies your portfolio management process.

Your rollover options include:

  • Old 401(k) to an IRA
  • Old 401(k) to your current employer’s 401(k) (if it accepts incoming rollovers)
  • IRA to a 401(k) (if it accepts incoming rollovers)
  • Multiple IRAs into one IRA

The process isn’t always simple. For example, you typically can’t combine pre- and after-tax accounts without facing tax consequences. You’ll also want to consider annual contribution limits and, if you’re still working, employer-sponsored retirement plans may offer less expensive investment options.

Let AWM&T Help

It’s never too early to start planning for retirement, and you don’t have to do the heavy lifting alone. At AAFMAA Wealth Management & Trust, we provide tailored retirement solutions exclusively for the military community. Our Relationship Managers are honored to provide a custom strategy to military spouses like you.

Email [email protected] or call (910) 390-1933 to get started on the retirement of your dreams.