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Scattered Money

Scattered Money

March 04, 2021

Scattered Money


If you’re like most people over the age of 40, you have probably had more than one job.  At each of those different jobs, you had a retirement plan.  Over the years people have a tendency to change jobs and in the process they have old 401k plans, Simple IRAs, profit sharing plans and others, scattered about with no direction, no purpose and no real plan.

I see this all of the time when I meet with people.  Before we first meet, they ask me what they should bring to our meeting.  I tell them to bring all of their investment and retirement plan statements, information about their insurance, etc.  The more information, the better.  It’s not uncommon for a married couple to have 7-10 different accounts.  I recently met with a couple that had received an inheritance.  Between the two of them they had 4 different company sponsored retirement plans, two IRAs, a Roth IRA, a savings account, a taxable brokerage account and a 529 for their young child.  That adds up to 10 different accounts at different companies, with different statements, with no direction and no plan.  It can get overwhelming and you feel a little out of control.  Here are a couple of ideas that might be helpful if this sounds like you.

What Do You Have?


The Bureau of Labor Statistics published a study from 2015 that showed the average person held 12 different jobs between the ages of 18 and 50.  When I was a kid, I worked at Kentucky Fried Chicken and didn’t have a company sponsored retirement plan, but it’s easy to see how a person can find themselves with scattered money.

So, the first thing you need to do is figure out what you have, where it is located and what type of account it is in.  For our purposes there are basically four types of accounts, traditional qualified plans, Roth accounts, tax deferred assets and nonqualified or taxable accounts.  If you are married, you can’t mix the husband’s IRA account with the wife’s IRA and vice versa.  People often ask if they can roll their old 401k plan into their spouse’s IRA, but that is not possible.  Those types of accounts are registered for an individual and cannot be combined. 

Once you have figured out where it is located and how much money you have, then you have to figure out what type of account it is.  For instance, an IRA could be a traditional IRA, a Roth IRA, a beneficiary or decedent IRA or a nondeductible IRA.  A 401k plan can be a traditional tax deductible plan, it could have a Roth option or some 401k plans offer an after tax option. 



I have a whitepaper titled, “401k Action Steps.” In it we talk about some of the options available to you after you change jobs.  You basically have four options.  They are:

  • You can leave the assets in the old employer’s plan if the plan allows it.
  • You can roll the assets over to your new employer’s plan. This of course assumes your new company offers a company sponsored plan and the new plan allows for rollovers into the plan.
  • You can roll the assets into an IRA.
  • You can take a distribution and deal with the tax consequences.

 Let’s look at these different options and talk about the advantages and disadvantages of each.


Leave it at the old plan:  The advantage to this is you don’t have to do anything.  Just let it sit at the old plan.  You can’t make any more contributions to the plan since you no longer work there, but this is definitely one of your options.  Most plans have the option to make you take your assets out of the plan if the account balance is less than $5000.00.  You will have to see the rules for your plan.

If you worked at a big company with a huge 401k plan, it might also be an advantage to leave your assets in the old plan because the expenses of big 401k plans can be very competitive.  Again, you have to do a little research and see if this advantage outweighs some of the other disadvantages.

The disadvantages of leaving it at your old company are you cannot make more contributions to the plan and you are limited to the investment options that are provided by the plan sponsor.  You also don’t have any control over the recordkeeper and the investment choices that are offered. 

Rollover the assets to your new employer’s plan:  This takes a little more effort but might be worth it.  The advantage of this is you avoid the scattered money problem.  All of your retirement assets are in one place. 

A lot of 401k plans will have a waiting period before you can start making contributions to the plan, but many plans will allow you to rollover your old 401k into the new plan even if you aren’t eligible to make 401k contributions.  Again, you have to look at the plan provisions and see what they allow.

A potential disadvantage to rolling over to the new plan goes back to control and investment choices.  Also, company sponsored plans could actually have higher expenses than doing something on your own.  You just have to look at the new plan and see what it will cost.

Rollover the assets to an IRA:  This is the option that gives you the most control and choice of investment options.  In addition, most IRA accounts don’t charge big administration fees so the expenses that you pay are very transparent.

Another advantage of this option is the ability to match the investments and asset allocation to your risk tolerance and financial goals.  Plus, if you aren’t happy with the performance of the account, you have the power to make changes as you please.

The disadvantage to this option is it might be more expensive than leaving your assets at your old company or rolling them over to a new plan.  Some companies with big retirement plans have very competitive expenses and you have to take that into consideration.

Take a distribution:  Most 401k plans have an option of taking a distribution from the plan once you are no longer employed at the company.  The advantage to this is you get the money right away.  The disadvantages of taking a distribution prior to age 59 ½ are striking.

They include having to pay a 10% early withdrawal penalty in addition to being taxed on the total amount that you take out of the account.  In addition to that, you are losing the future value of your investments.  The Rule of 72 can give you some idea of what that can cost in the future.  If you take the number 72 and divide it by an interest rate, say 7%, then that’s the number of years it takes money to double.  So, 72 divided by 7 equals 10.28. 

If you are 35 years old and you have $20,000, for instance, at age 65, your $20,000 would be worth $160,000 using the example above.  Depending on your tax bracket, if you were to take the $20,000 out prior to age 59 ½, you would end up with approximately $15,000.  In most cases, taking an early distribution is not the best idea.

I Can Help


I hope this has been helpful.  If you are somebody who has had various jobs over the years and has, “scattered money,” I would be happy to explore the options that are available to you.  If you would like a copy of the whitepaper, “401k Action Steps,” let me know and I can send you a link to it.  As always, feel free to reach out to me by clicking on the “Get In Touch” button at the top of my website.  Thanks for taking the time to read my post.  KB