Move From A Mess of Investment Accounts and Old 401ks to Simplicity
Have a mess of investment accounts? Do you know the mix of stocks, bonds and other assets you own? Trying to manage your portfolio across multiple accounts, at multiple financial institutions from multiple employers can be a real challenge. We talk with clients and friends everyday that are struggling to stick to their investment strategy because its just too complex to implement across a web of accounts. In this episode we discuss an approach for simplifying your account structure - and your life. We cover:
What types of investment accounts do I need?
What is the difference between retirement accounts like an IRA, 401k, ROTH etc.
How to begin the process of consolidating down to our "core 4" accounts
Transcript:
Professionals tend to have a web of 401ks, IRAs, brokerage accounts. You've got that Robin hood account that you opened last year because you wanted to buy some AMC stock and on the meme stocks, then you got a cryptocurrency account. Coinbase because you need a crypto, right. And then like 10 years ago, your brother's friend's uncle told you that you should get it.
This thing called a Roth IRA, which I thought that was a good idea. And so now you've got like 6, 8, 10 more accounts out there. And it makes it really difficult for you to manage your investments just because it's a mess of accounts.
Hello. Hello friends. We're back with the six-figure investor. If we haven't met yet, my name is Saxon and I am the host of this show. I have the privilege of interviewing my husband every week about financial subjects and money. And today, Brian, you want to tell our audience what we're going to be talking about?
So today we're going to talk about a problem that we see really often with new prospects. And that problem is that there's a big mismatch between how you believe you are invested and the actual assets that are in your portfolio. So Saxon, if I asked you today, what percentage of stocks do you own and what percentage of bonds do you own and what would you say.
I would say I feel really convicted right now because I have no idea. Yeah. And, and that, and that's okay. And that's, I, we find so often that that most people don't know in the reason that you don't know is, is not because. You don't know how to be a good investor.
It's not because you're not educated. It's because you get busy. It is. I thought it was because I just let my money roll into the places that it rolls into and I don't ever go back and look at them. Exactly. So it's a good opportunity for our listeners to stop and reflect and say, do you actually know.
What your asset allocation is the mix of stocks, bonds, and other assets. Do you know what that is right now? And if you don't know right off the top of your head that's okay. Can you pull it up really fast while you're at lunch today? Not while you're driving in your car, listening to this podcast or after work?
I, I think what's important to this for the audience that's listening is you know, Brian talks about how we're educated and you know, we want to be good investors, but in all honesty busy is a part of the problem, but also just like not wanting to deal with.
Is another part of the problem. Like if the money could just manage itself, that would be totally fine with me. And I'm sure there's a whole swath of the seven listeners to this show that feel the exact same way that money is going into accounts, but they don't necessarily actively monitor what's happening and it's kind of sitting.
In a bunch of different places, just accumulating and they don't really know what's happening. It's, it's really hard because a lot of times your money's in multiple accounts and to your point, you don't even know how to access them. You don't know what the passwords are. It's hard to get them. Right.
Professionals tend to have a web of 401ks, IRAs, brokerage accounts. You've got that Robin hood account that you opened last year because you wanted to buy some AMC stock and on the meme stocks, then you got a cryptocurrency account. Coinbase because you need a crypto, right. And then like 10 years ago, your brother's friend's uncle told you that you should get it.
This thing called a Roth IRA, which I thought that was a good idea. And so now you've got like 6, 8, 10 more accounts out there. And it makes it really difficult for you to manage your investments just because it's a mess of accounts. So the mismatch in your intended investment strategy and what you actually own.
It's not because you're not able to figure out what you want to invest in. It's just because it's become too complex for you to manage. Yeah, that sounds terrible. But I really identify with the problem that you're talking about when you say that. Yeah. Throughout my life, I've accumulated all these random accounts.
So how well have I done it? Integrating all of them? So when you left your last fortune, I don't know, 10, 15 company. How many investment accounts did you have? This is really embarrassing. And I wish you weren't asking me. I don't know more than I. So you had an IRA, you had a Roth IRA.
You had a couple of brokerage accounts that were taxable because you have one that you still have today that has restricted stock and that's vesting over time. Right? You had another brokerage account that has company stock in it that has invested that you can sell. And then you've got other accounts that you're investing in.
So you've got all these different. Yeah. And, and they're created because of actions either that you took or you know, in a lot of cases with, with high-income professionals that your employers took on your behalf to to give you executive compensation and it's, and it's confusing and it's difficult to operate in.
And so one of the core things. That we have to do to be successful is organize that into a way that that's easier to use so that we can invest the way that we want to invest. Awesome. So synopsis, my accounts are a mess. They're all over the place. I may or may not be actively managing them. I may or may not know what is in them.
Where does a mess like page. Yeah, I might have to do that thing where I go to every account and I reset my password because I know at least it's connected to my email address. So tell me, Brian, for, you know, the three listeners who are, are listening right now, who identify with this experience and with my heartburn, when it comes to all these numerous accounts that we have, where do we go from here?
Yeah. So we believe that most six-figure professionals who were in the middle of their careers should have. Four accounts and then maybe a few more depending on your compensation package, but you need to think about having four core investment accounts, period. Not more than that. And those accounts are a Roth IRA, a traditional IRA.
Your current employer's 401k and then perhaps a taxable brokerage account. And then if you have account with restricted stock or employee benefits, we'll kind of put, carve those things off to the side. But just those four accounts or Roth, traditional IRA, 401k, and a taxable brokerage account. We're going to start there.
Okay. You used the words Roth and they use who words I operate. Like I should understand that those things are different. I don't, you understand how the IRS created those really intuitive terms when they go to those accounts? Yeah. You know what it reminds me of, it reminds me of, you know, when vine and I, early in our relationship, we lived in Atlanta and there are like 214th streets in Atlanta that are names, different versions of Peachtree.
That's how I feel about the different, the rots and the IRAs. A bunch of different streets named Peachtree. So for the people like me, what are the differences? Just high level between these things so that we can get our mind, you know, in order again. So the best way to think about those, those accounts is the key difference.
The tax rules that the government created to incentivize retirement savings. So the government started in and said, Hey, it would be a good idea. If we got people to save for retirement. And so they started to give people different tax incentives to do that. And so your 401k that you contribute to every year, you get a tax deduction, you get to write off the income that you put into your 401k and your employer.
Some or all of your contributions in your 401k? A traditional IRA works much the same. You write off on your current income taxes, the money that goes in there. The challenge with those accounts is that when you get down the road into retirement, you pay taxes on everything that comes out of those accounts, because you're not paying taxes on that money now.
So it can be great for our current year tax deduction. But it can be challenging down the road when you have to pay all those taxes Roth IRAs or, or the reverse. So you pay taxes on the money that goes into a Roth account today. But it grows tax free and you can take the money out without having to pay taxes on it because you've already paid taxes today.
And then a taxable brokerage account because Roth IRAs and 401ks and traditional IRAs have income limits. So the amount of income that you earn that. How you can contribute to those accounts. Every year a taxable brokerage account is where anything that you can't contribute to a retirement account would go, okay, got it.
I sake. Let's keep going. So you've said I need to set up these four different. Yeah. How does that work? How do I do that? Yeah. So, so to go from your 12 accounts, including that Roth, that your brother's monkey's uncle told you about and your, you know, your Robin hood account, all those things down to our core four we would recommend picking your.
Single custodian or a brokerage firm. Charles Schwab fidelity, Vanguard are examples of custodians or brokerage firms. Remember they don't determine how you invest. So these are firms that just, hold your assets and give you access to the market. So you're going to pick one of those.
You may already have a relationship either through your employer or because you have your personal assets at a low cost custodian or brokerage firms. So you're going to pick one of those. And if you don't already have those accounts, you're going to open those accounts there. So you're going to open a Roth IRA.
You're going to open a traditional IRA. And you're going to open a regular brokerage account. And then you can take all of your other assets for the most part and consolidate those into those four countdown. It's really important that you talk to a tax advisor or your financial advisor before you make those transactions, because.
Some really complex tax scenarios that can come up and there are ways that you can create tax liability if you do those conversions the wrong way. So we want to get from the 12 accounts or however many you have today down to four that you can manage. But you need to talk to a professional and make sure that you do that the right way.
Okay. So I want to take all my mess of accounts. I want to get down to core four and like that term core for. And I'm going to pick a platform in which I'm going to do. How, like, tell me a little bit about how that works. So once I picked my platform, I've got all these accounts out there. How do I get those 12 accounts or whatever it is into the court?
So, so once you've opened your new accounts, this will be the most complicated part of the process and unfortunate. Because the industry is con convoluted and, and makes this challenging. There's, there's not really a way to simplify it. You're going to have to either go online to your existing accounts, or you're going to have to call those really awesome 1-800-NUMBERS and tell them what you're trying to do.
And if you're working with a professional with an advisor, with a tax advisor, they can probably help guide you through a part of this process. But if you're not, if you tell those firms, Hey, I'm trying. Roll over in account, or I'm trying to transfer an account from your firm to one of my core four accounts.
They'll be able to walk you that process, but you're going to have to contact all of those individual firms where you have accounts in order to, to move the money. That sounds like a nightmare on Elm street, but I do understand the benefit of then being able to see all my accounts in one place and actually manage on, on your iPhone while you're at lunch, but not wired.
That's a good plan. That's a good plan. Okay. What else does our audience need to know about this? So I think the key takeaways are. You need to start by cleaning up the mess. You want to consolidate down into, into the core four and, and again, make sure that you reach out and seek professional help before you do that.
We walk clients through that process every day of the week. It seems like. So make sure you get professional help so that you don't create a tax situation that that you are. Okay. So say I am in this position and I want help to get down to the core four. And I need to talk to a professional.
I want to talk to you, Brian, how do I get in touch with you? You can, you can talk to us. So I'm on the top right-hand corner of our website. You can create a meeting with us that is an intro call at a convenient time for you. And we'll, we'll talk you through the process. Get to know you a little bit, understand if you know, we're a fit to work together and if we can help you, then that's fantastic.
And if not, we'll send it to someone. Awesome. And that website is the capital stewards.com, right to H E C a P I T a L a. Excellent well, within a stewards, we'll link it in the show notes. If you want to talk with Brian A. Little bit about your situation
awesome. Well, another great insightful show. I mean, maybe not the sexiest one that we'll ever have, but I learned that because of consolidation. That's like that's that's top of the house or, I mean, how about blah? All right. That's all for now, friends. We'll see you again soon. Bye.