Getting a Handle on My Retirement Accounts

Do you ever think about those retirement accounts that you opened with past employers?  No?  Don’t worry, you’re not alone.  I have had organizing my retirement accounts on my to-do list for quite some time, and am just finally getting around to doing something about it.  I’m finally getting a handle on my retirement accounts.

I’ve got dough (dough, dough) in different area codes (area codes).

Anybody remember that Ludacris gem?

In addition to my Roth IRA, I had four different retirement accounts open in three different states!  Right after college, I joined the NYS retirement system when I worked for the state for a summer job.  I joined the California state retirement system when I worked out there after college.  I also contributed to a hybrid 401k at my old school.  When I started teaching in New York, I joined the Teachers Retirement System.

I decided to get organized and figure out a way to get my money in (mostly) one place.

Transferring Membership

I was very lucky that I joined the NYS retirement system when I did.  My mom encouraged me to join when I was 20 years old, when I worked a summer job.  I had no idea then that I would later become a teacher, and would be able to transfer my membership to the Teachers’ Retirement System, and would benefit from being a member of an earlier tier.

Everything takes an incredibly long time with the state, so once I completed the paperwork to transfer my membership, I had to wait about six months for the transfer to go through.

One of the benefits of being a member of the earlier tier is that, after 10 years in the system, you no longer need to contribute 3% of your salary.  Once my transfer was complete, my school actually had to pay me back a whole year of contributions.  I’m using that money to buy back service from four summers that I worked before I joined the retirement system.

Fees Matter

At my old school out west, I contributed around 3% of my salary to a Roth 401k.  I contributed after tax dollars, and my school matched my contribution up to 3%.  When I left this job, I could no longer contribute to this account.  This money has been hanging out in this Target Date retirement fund that I chose, and I hadn’t really paid it much mind, until I joined Personal Capital, and started receiving alerts about how high those fees were.

By rolling this account over to my Roth IRA, I will pay a lot less in fees and have better investment options.  For something I put off for so long, the process is pretty straightforward.  I just need to get sign some paperwork with a notary public, and I’ll be good to go.

Rolling Over a Pension

I contributed to the California state retirement system for a year when I worked out there, and had long since forgotten about it.  I found some ancient statement with a tiny account balance, and it reminded me that I wanted to do something with that account.  I set up a Traditional IRA to accept the rollover, and contacted the pension fund to find out about how I go about getting that money.  They sent me some paperwork to fill out and sign with a notary public and then they will be able to move the money into the IRA.

Again, it was very easy to make these changes.

Does it make sense for you to move your retirement money?

Everyone’s situation is different.  For some people, it may make more sense for you to keep your retirement accounts where they are (especially if you are vested and expect to receive a defined benefit).  For other people, it makes more sense to roll over old 401ks to an IRA.  Some people also choose to transfer their money to another 401k at their new job.

If you’re not sure, start by taking an inventory of the retirement accounts that you hold.  Do you like your investment choices?  Do a little sleuthing to figure out what you are paying in fees (Personal Capital will do that for you).  Determine whether or not it makes sense to leave the money where it is.  Chances are, you’ll spend less in administrative fees and have better investment options if you roll these accounts into an IRA.

If you decide to complete a rollover, contact the brokerage companies where you hold your accounts.  If you do not have an IRA, you will need to open one before you fill out the paperwork with your 401k provider.  If you contributed after-tax dollars, this money can be rolled over to a Roth IRA.  If it was pre-tax dollars, you’ll need a Traditional IRA.  Make sure you read the fine print on your paperwork to understand the tax implications of whatever decision you make.

When you changed jobs, what did you do with your old retirement accounts?

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