- You Left a Job and a Retirement Plan Behind
Your 401(k) or 403(b) is an employer-sponsored retirement plan. You could just leave it there BUT eventually it could get out of whack. Also, when you leave your employer, you can’t sock any more into it. In some cases, you could cash it out, but you’ll most likely get hit with taxes and penalties. The last and probably best option is to either move it into a 401(k) with your new employer or an IRA with a local advisor. With this choice you will have many more choices to invest into.
- You May Be Getting Hosed
If moving your investments will lower your fees, it’s probably a good idea. For a digital adviser, the management fee (the amount that adviser charges you) should be well below 1% per year of your assets under management. For example, our digital program, Sustainfolio, charges a flat 1/2 of 1% annual management fee or 0.50%. For a more personal advisor like Sustainvest Asset Management, you still pay below 1.00% AND have a person to chat with regarding financial planning and investing the way you want. Many people don’t realize that they are paying their finance person in some cases 1.50% or close to 2% annually and well, that’s just plain old ridiculous. Remember 1.50% is 50% higher than 1.00%!
- One Word.
One word. Consolidation. You wouldn’t keep different items of clothing in different closets would you? No. It’s too much of a pain to dig around. Consolidating your investments into one place can help you wrap your mind around your finances and enjoy other things in life (disclaimer: we use Charles Schwab and Co. as our custodian for client portfolios). A healthy investment portfolio can have stocks and bonds, and funds, etc. If your investments are managed in different places, they might accidentally start to overlap too much, especially as the markets change.
At Sustainvest and Sustainfolio, accounts are rebalanced whenever the asset allocation gets off-kilter. We make sure the amount of risk you’re taking is right for your specific goals and your specific timeline.
- You’re Getting Near Those Golden Years
You can’t keep money in a tax-advantaged retirement account forever. The tax man wants his part eventually. Once you reach a certain age, you have to start making withdrawals. These are called RMD’s or required minimum distributions, and if you don’t take them on time, you’ll get hit with a big penalty. If you have an old, forgotten 401(k) from a previous employer (it happens) — or even just many different accounts all spread out — it could be easier to accidentally miss one.
- You’re Out of Options
Not everybody offers the investment options you want. If you’re interested in investing in sustainable investing (ESG), then move to the firm that specializes in this (like Sustainvest!). Don’t stick with the local broker because they seem nice. The planet and future generations are counting on you.
6. You Want to Work with a Single Human
If you’ve got a lot going on with your finances, you probably have more than one financial advisor. But this can start to cost you, in extra fees and extra time. The digital platform may not be the full service you need and so working with a registered investment advisor (RIA) who holds the fiduciary standard and isn’t incentivized to push annuities or insurance products could eliminate that uncertainty about what you are paying for.