How Organized Are you?

How organized are you? I’d say I’m pretty organized, but there is one drawer in my house that is a big, hot mess. It is a disaster, and my husband loves to complain about it. And my response is: I have one drawer that is my “catch all” and to just ignore it. So where do you fall on the organization spectrum?

Usually the thing we don’t feel like dealing with is also the thing we are the most unorganized with. Sound about right? How many investment account statements do you have littered throughout your house? Unopened statements, 20 year old statements, statements for accounts you no longer have…

Money can be tricky when it comes to getting it organized and staying on top of it, but it doesn’t have to be this way, and it definitely doesn’t have to give you a constant headache! Let me give you an example of a couple, and let’s say they were both teachers, who taught at multiple schools throughout their careers. And by multiple, I mean more than 10 schools! And at each school, they opened a 403(b) plan, which is similar to a 401(k) but for non-profits like schools, hospitals, police departments, etc. Sometimes when they changed schools, they transferred their 403(b) plan into the new school’s plan, while other times, they left it at the old plan. And fast forward to today, and now they might have 15 different 403(b)s.

15 different 403(b)s can be quite daunting to someone who doesn’t know what to do with one, let alone 15. So they ignored them and ignored them, and shuffled the paperwork and statements from one drawer in their house to another. Now you might think, what’s the problem? Well as this couple gets older, they will have to deal with Required Minimum Distributions. Once they hit 70 ½ they will have to start withdrawing money from each plan. You see when you turn 70 ½ the IRS requires you to withdraw money each year from your IRA, 401(k), 403(b), or other retirement account, and it is called your Required Minimum Distribution. The first year, the amount is 3.65% of your account value on January 1st of that year and it slowly increases each year. They go all the way out until you are 115 years old, and by then they require you to take out 50%!

Now if they never consolidated all of their accounts, they would have to go into each 403(b) separately and withdrawal this Required Minimum Distribution or RMD. If they were 15 401(k)s, it would be the same thing, 15 different RMDs. If they were 15 different IRAs, you would be able to take one RMD from one IRA, but it would have to total the amount of all the IRAs. Make sense? I know a little confusing, and just another thing you have to think about when retirement comes knocking at your door.

Anyway, this couple was having trouble staying on top of all these accounts, and you can barely say they were staying on top of them since they had no idea how they were invested, where they were located, and how much money was in them. Can you imagine how much better their accounts may have done if they were more active with them and were managed better and aligned better with their risk tolerance, time horizon, and goals? About 90% of the accounts were invested in high growth stocks, which can be very volatile and were no longer aligned with their current risks and objectives. What would happen if there was a huge market correction? They may end up needing to go back to work or having to downsize to a tiny house on their children’s yard.

For a few reasons, it made sense for them to consolidate and pay more attention to their accounts. Don’t you think for a couple like this, their stress level might go down after organizing their accounts and making it easier for their retirement withdrawals? For every minute we organize, we potentially save ourselves hours. And if you have ever tried to move over 403(b)s, you will know it can be a little difficult and time consuming. Part of the process is getting your old employer to sign off on the paperwork, which meant researching all the 403(b) plans they have and connect them to each school. But this upfront time, can potentially save them a lot more especially during retirement when you really want to enjoy yourself (and not potentially be stuck on the phone for hours a day trying to get someone to help you!).

Just doing this one thing can save you time, energy, a whole lot of frustrations, and help to keep you in control over your money.

So what will you organize this week? Pick one item, and consider holding yourself accountable by emailing me what you picked!

Happy Organizing!
Jessica Weaver, CFP®, CDFA™, CFS®
Wealth Advisor

In educating you on available options, each of which has potential benefits and drawbacks, we’ll look at your specific situation to help determine which option may be in your best interest.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Jessica Weaver and not necessarily those of Raymond James