No one needs more accounts, passwords, and paperwork to keep track of.
Bringing all your investments to one institution can help make life simpler and more convenient—and maybe even save you some money. A consolidated view of your accounts, with a single company or software that provides a complete view of your finances, can make it easier to track your asset mix, tax situation, and financial life. If you consolidate assets with a single company, you may become eligible for lower commissions and fees, or additional services.
"Managing your financial life takes time, but adding the complexity of planning across multiple providers can make it more time-consuming," says Ann Dowd, CFP®, vice president at Fidelity. "Why make it hard on yourself to get a complete view of your cash flow, financial needs, and investments?"
Here are 4 ways consolidating your accounts could help simplify your financial life.
1. Complete view of investments
If you have investments in several locations, it can be difficult to stay on top of your overall portfolio. It’s also complicated to make your investments work together. You could be duplicating exposure to certain investment types.
When you consolidate, it’s much easier to take charge of your strategy and help keep your intended asset allocation on track. Moreover, rebalancing can be a much simpler task with an integrated view. It can be easier to form a clear picture of your performance and investment mix when it’s all in one place.
Typical consolidation opportunities include moving money from a 401(k) held at a former job to a new employer's 401(k) plan or rolling it over to an IRA. A rollover IRA can offer more investment options and access to different services.
If you've accumulated HSA balances with other providers, consolidating them into a single account can help simplify management and reduce fees. If you can make pre-tax payroll contributions and receive employer contributions with a current provider, you may want to keep the HSA active and not transfer the balance to preserve the FICA tax savings. You may periodically transfer funds if permitted. Read Viewpoints: 3 ways to consolidate multiple HSAs.
If you're self-employed—or considering self-employment—another option to consolidate is rolling over your 401(k) into your own small business retirement plan, such as a SEP IRA or self-employed 401(k). Learn more about self-employed rollover options.
Of course, you always want to carefully consider any potential benefits of remaining in the 401(k) plan before deciding to roll it over. You'll want to think about the unique investment choices, including potentially lower-cost shares, fees and expenses, and tax considerations, along with the plan’s withdrawal rules and the protection it generally offers against creditors. Additionally, investors with company stock in their 401(k) or other workplace retirement plan might lose the option to elect net unrealized appreciation (NUA) if they roll these assets into an IRA and should speak to their tax advisor before making any decisions.
Read Viewpoints: Considerations for an old 401(k)
With Fidelity Full View®, you can see all of your investment accounts, at Fidelity and elsewhere.
2. Track potential tax opportunities
Bringing retirement and brokerage accounts together with a single service provider may make it easier to implement a tax-efficient investing strategy. For taxable accounts, tax-loss harvesting may be easier when your investments are with a single provider in one account, where you can easily see your gains and losses.
Or, you may find it easier to implement an asset location strategy. Your more tax-efficient investments can be in one taxable account, while less tax-efficient assets can be kept in tax-advantaged accounts like IRAs. If they're with a single provider, it can be more convenient to keep track of them.
3. Reduce fees and commissions
Fees can affect your returns. These days, you can find index funds with low or even zero expense ratios, place online trades with no commissions, and get brokerage accounts with no account fees. When you pay less in fees, more of your money is available to potentially grow and compound over time.
If you're investing through multiple providers, you might be paying more fees than necessary.
Some providers may generally be lower cost than others. It can be a good idea to investigate the fees charged on your accounts and investments to see how much you've been paying. That can help you see how any change would impact you.
4. More effective planning
Consolidating accounts may also improve your financial planning. Being able to track your investments, spending, debt, and net worth all together can help you spot trends, identify potential problems, and change course if necessary.
Viewing health care savings alongside retirement and brokerage accounts may also provide a more complete view of your finances. For those contributing to an HSA, consolidating accounts can make it easier to monitor balances, investments, and spending for future qualified medical expenses.
Understanding your full financial picture can also help reduce the stress of managing several different financial accounts and goals. With spending accounts in the same place as savings and investments, it's very easy to transfer money between accounts and quickly see where you stand relative to all of your goals.
For example, retirees need to determine how much to withdraw from their retirement accounts each year to ensure that their retirement savings will last their lifetimes—a so-called sustainable withdrawal rate. They also need to make sure they're meeting their required minimum distributions (RMDs) from certain retirement accounts when the time comes—starting at age 73 (and increasing to age 75 in 2033, for those born in 1960 or later).
With all of your accounts under one roof, it could be easier to evaluate and implement your withdrawal strategy.
If you're a Fidelity customer, you can link external accounts in Full View and track your spending, saving, and debt from one dashboardLog In Required.Look before you leap
If you decide to consolidate, do it wisely. Consider whether consolidating will mean liquidating certain investments and possibly incurring tax consequences. For mutual fund investors, consider the investment options, particularly if your 401(k) or workplace plan offers institutional shares, which may be less expensive. Overall, you need to be sure that the benefits outweigh any potential costs.
Creditor protection can be a consideration as well. ERISA-governed workplace plans generally have robust federal protection from creditors both inside and outside bankruptcy. In contrast, IRAs receive federal protection up to an inflation-adjusted limit in bankruptcy, while non-bankruptcy creditor protection is determined by individual state law.
Think about safety and security as well. Look for institutions that have multiple layers of security, such as strong encryption, advanced firewalls, and secure emails, continuous proactive system surveillance, and strong business continuity plans to enable continued service to customers. They should provide enhanced security around login and high-risk transactions—without adding a lot of extra work for you.
Consider these important features:
- Multi-factor authentication. For extra protection on logins and sensitive transactions, verify your identity using methods that may provide a higher level of protection in certain circumstances, such as a passkey, biometrics, authenticator app, push notification, or hardware security key.
- Money transfer lock. Block electronic money movement out of your accounts, protecting your balances from unauthorized transfers.
- Security text alerts. Get instant security alerts on your mobile number when certain transactions or profile updates are made to your account.
Learn how Fidelity keeps your accounts safe with our security measures and plans to ensure critical services are maintained for customers.
It's also important to consider how your money is protected in case your financial institution goes out of business or declares bankruptcy.
- The Federal Deposit Insurance Corporation (FDIC) is a US government agency that insures deposits at FDIC-insured banks, generally up to $250,000 per depositor, per insured institution, for each account ownership category.1
- The Securities Investor Protection Corporation (SIPC) is a nonprofit organization that protects stocks, bonds, and other securities in case a brokerage firm goes bankrupt and assets are missing. The SIPC will cover up to $500,000 in securities, including a $250,000 limit for cash held in a brokerage account.
Consolidating is a decision that takes some time and consideration, but the potential benefits may make it worth your while. You could find it easier to set and maintain your asset allocation as well as diversify your portfolio more effectively. You might find opportunities to save money through both improved tax efficiency and the lower fees often associated with having more money at one provider. Most of all, you'll have a chance to plan more effectively and take control of your finances. That's a move that, in the end, could improve your overall financial picture.