Talk to Ted: What is the "right" number of accounts?
Chances are, you've got some money questions—most of which probably boil down to: How do I get more of it? But you might not know anyone who can help answer those questions for you. Until now.
Meet Ted. He's the head of our investments team and loves talking to people about their money. (He also enjoys hanging out with his daughters, cooking and Hall & Oates, if you're curious.) Here, he's answering common investing questions you've probably wondered about too.
Ted – I have investment accounts at a few different financial companies. Is there a "right" number of accounts? Wouldn't it just be easier to have all my accounts in the same place?
Life is full of changes: jobs, homes, even financial relationships. These changes may cause you to open one account, then another, then another. You are not alone. In fact, many Americans have multiple accounts. In some cases it makes sense, because each account may serve a different purpose and provide different benefits and tax treatments.
So what types of accounts make sense for what type of purpose?
- Planning for your child's college? Consider a 529 account.
- Planning for retirement? A 401k, 403(b) and/or IRA are generally the best options.
- Have extra cash that you want to put to work towards future goals? A general brokerage account may be right for you.
Having separate accounts can also help you compartmentalize your goals and stay on track. More on goals planning here: Getting your ducks in a row
To your second question, moving your accounts to one place may offer benefits as well. Many firms offer perks or promotions for consolidating with them. Here are a couple of things to consider before taking the plunge:
- Fees: Know what you are currently paying and what you will be paying where you go.
- Investment options: Not every plan, platform or financial company offer you access to the same investment options. Make sure the financial institution you are considering has what you need or want.
- Tax consequences: Make sure you know the rules or consult a tax professional before moving from place A to B.
Life can be hectic, but your investments don't have to be.