He will also leave his traditional IRA with the zero balance open because he uses that to fund a backdoor Roth IRA conversion strategy that allows him to make a nondeductible contribution to that account and then convert it to the Roth IRA he holds with his broker.
(For more information on this topic, see ) What Should Be Replaced The spreadsheet you did in the previous section will highlight any investments that don't match your goals and time horizon, as well as any that aren't doing well for their category. It is also useful to look at how diversified your holdings are; you may find that you are too heavy in certain sectors and could use more investments in others.
He makes 0,000 a year and is maxing out his company’s Roth 401(k) plan, which is invested in a diversified aggressive portfolio of small-cap, biotech, technology and health-care funds.
What You Can Consolidate If you have both Roth and traditional IRAs scattered in various bank or brokerage accounts, you can simplify your life by combining all of each kind into two accounts.
If you invested your IRAs in CDs (probably not a good idea unless you’re at least 60 years old), wait for each CD to mature before doing this.
His assets are listed as follows: – $75,000 Roth 410(k) at his current employer; – $3,500 traditional IRA at discount broker; – $4,500 Roth IRA CD at his bank; – $2,500 Roth IRA CD at his bank; – $12,400 IRA indexed annuity rollover at discount broker; – $0 balance traditional IRA; – $30,000 Roth IRA at full-service broker; – $50,000 nonqualified variable annuity; – $15,000 money market with full-service broker; and – $40,000 in stocks and bonds with full-service broker.
Eric could simplify his record keeping by combining some of his accounts.
Or, like Eric, you might want one discount broker and one full-service broker.
Consolidating your brokerage accounts will mean you'll have fewer accounts and people to track and more money in each place, which could gain you additional services or better rates. In Eric's case, he might consider moving his retirement money into more moderate holdings.
The following example shows when this can and can’t be done.
Eric is 48 years old and works for a software publishing company as a computer programming manager.
If you inherited IRAs from your father and from your mother, you cannot combine them!