Toucan Talk
Are Your Retirement Assets Managed in Unison?
Provided by
Michael Oana
mjo@teamoana.com

The opportunity to save for retirement on a tax-advantaged basis while you're working is a valuable one. Perhaps that's why 401(k) plans and individual retirement accounts (IRAs) are so popular. In addition, these retirement assets are portable and under your control, which is a big plus: you can change employers and generally take those assets with you.

But with portability and control, you need to keep track of what you own - which can be difficult when job turnover for Americans continues to increase. The U.S. Bureau of Labor Statistics reported in 2002 that currently employed Americans can expect to change careers five to seven times in their lifetime. As a result, it's common for someone nearing retirement to have a handful of IRAs and 401(k)s. In 2003, 55 percent of households owned two or more traditional IRAs, and 44 percent of Roth IRA owners also had two or more accounts, according to the Investment Company Institute.

Holding multiple retirement accounts can hinder a coordinated approach to portfolio management and may result in under-diversification - and a level of risk that's inappropriate for your goals and investing time horizon.

Michael Oana is the Chief Investment Officer with Team Oana Investment Advisors. Team Oana is a locally owned boutique investment firm specializing in helping conservative investors. Mr. Oana's Toucan Talk column appears bi- weekly in The Columbia Star.

Early in the retirement planning process, one of your first steps should be to have a financial advisor take a detailed look at what you own and what you owe. It's often a good idea to aggregate and consolidate your retirement savings into a single IRA for several reasons

* Manage investment strategies more easily: Many investors tend to like the specialties provided by different advisors, believing that by keeping assets spread apart they'll get diversification - but many industry experts feel that's a myth. If you have multiple accounts, there may be less diversification than there appears to be when you sort out all of the investments you hold.

For example, you may hold a lot of technology stocks and funds with one advisor, while owning an index fund with similar holdings with another advisor. It would likely be more effective to work with a single advisor who sees all of your assets and liabilities, and who can customize - and help execute - a strategy to help you accomplish your goals.

+ Simplify required minimum distribution (RMD) calculations: Unless you're still working and only have a 401(k) plan, you must begin withdrawing money from your IRAs in the April following the year in which you reach age 70.5. Naturally, you want to manage the amount you take out since too much could put you into a higher tax bracket, and too little can mean paying excess accumulation penalties of up to 50% to the IRS on the amount that should have been withdrawn.

The RMD amount is determined by actuarial tables, taking into account your gender, life expectancy and savings balance. Consolidating into one plan makes it more likely that you'll withdraw the right amount - and helps you continue planning for a retirement that could last 30 or more years. Drawing money in the right order, and from the right account, is important in protecting your nest egg from erosion through taxation.

· Ensure up-to-date and accurate beneficiary designations: For each IRA you hold, you can name a beneficiary, or multiple beneficiaries, to inherit the balance upon your death. Though you may change beneficiary designations, by consolidating into a single IRA, it's easier to keep track of whom you've named and what overall percentage you've allotted to each beneficiary.

· Receive a consolidated statement: Having a single financial advisor manage your assets makes staying on top of your monthly progress much easier - you can monitor your assets by reviewing one statement. It also simplifies making appropriate adjustments to your asset allocations.

· Lower account fees: Having multiple accounts often means paying multiple fees. In many cases, total fees for managing a consolidated IRA will be less than the fees assessed on various accounts with multiple providers.

A comprehensive strategy

A primary advisor, with a global view of your finances, can also help you decide which assets should remain outside of tax-advantaged retirement savings accounts, and how all your investments come together in one picture of diversification, risk and opportunity.

Team Oana Investment Advisors, Inc., is an independent company with securities offered through Summit Brokerage Services, Inc. Member NASD & SIPC.