When most people think about retirement, they tend to dwell on their larger assets. It is fun to sit back and think about what the future will hold when you are starting out with a lot of assets or a nice-sized pension. All too often people seem to "skip" over some other key assets, such as an older 401K or 403B from a previous employer that has just been sitting there – rusting away like an old vehicle set out behind someone’s barn. I am always amazed at the number of people that tend to ignore smaller investments, and "put them out to pasture." When asked why the individual hasn’t done anything with the old investment, results like, "Oh, it’s no big deal. It is just a small amount of money," are fairly common. Many people think that a $3-4000 account is not worth the hassle, or it is just "play" money.
But the money didn’t get there on its own. One of two things had to happen to get the qualified account built up. Either the employer contributed money into the account on your behalf (in lieu of a higher salary, of course!), or you contributed to the account on your own. Either way, it cost you something. Don’t treat it as "no big deal." A properly managed account can add up to a considerable amount over several years.
What should you do with a smaller account? First, consider all of your options. In some cases, you can consolidate accounts. This is generally viewed as being a sound thing to do. Secondly, you can start to manage the account yourself, or have a financial professional do it for you.
Depending on how long you have had these smaller accounts, you might have other options to consider as well, such as rolling them into an IRA, and possibly converting the IRA into a Roth. By now you should know that we like the Roth IRA option. Pay your taxes now and get them over with. Which way are taxes heading? No one knows for sure, no one has that proverbial "crystal ball." But according to the latest reports, our government has already committed $12.7 Trillion to help get us out of the Credit Crunch. At some point in time it will have to be paid back…
