Here’s how to add almost $7,000 or more to your retirement account without contributing one cent.
New England Pension Consultants estimates that each of us changes jobs seven times over 40 years, and most leave their 401(k)s behind at their former employers.[ad#Google Adsense 336×280-IA]Each of these employers is charging an average of $70 a year in fees just to hold your money.
That’s $70 per account, per year. If you have four or five accounts, this can really add up.
Pension Consultants estimates the real fees for accounts left at previous employers averages about $2,800 over a career.
If we assume a 5% return, that $2,800 really costs you $7,000 in potential growth.
But if you have just three accounts that have been sitting around for just the past 20 years, we’re talking $4,200 before the loss of growth is calculated.
The average person [reading this article] will have at least 20 years in retirement to allow all those costs and lost potential growth to pile up.
The solution is really simple. Never leave your money behind. Instead, roll it over into a single IRA. You just eliminated a hefty annual cost.
But, worse than the fees, many people make the horrendous mistake of not leaving or even rolling over their 401(k)s, but cashing them out when they leave an employer.
The long-term costs – 26 years – of cashing out just a $16,000 401(k) at just a 5% annual growth rate is about $60,000, which works out to about $145,000 in future retirement cash flow. And that doesn’t include the taxes or the early withdrawal penalty.
Now, I know what you’re thinking. At our ages, we aren’t changing jobs seven times or, for most of us, even once.
You’re right. But how many IRAs do you have scattered all over the lower 48? Each of these accounts charges an annual fee, and some are wrapped in a management fee, too.
Don’t let this happen.
Consolidate your 401(k)s and IRAs into one rollover account and save a ton of money between now and our final exit. Your cash flow will thank you.
Source: Wealthy Retirement