In the past, spring cleaning was mostly about refreshing our immediate physical environment. (Do I really need all these sweatpants? Have we ever dusted the top of these cabinets?) But this year, it’s bound to encompass a whole lot more. Over the next few months, many of us will be taking stock, of not only the things we own, but also what’s most important to us as we resume our (almost) normal lives.

In fact, this might be one of the most important “spring cleaning” seasons in recent memory. We’re all deciding how and when we’re going to return to school, to work, to in-person events. We’ll be weighing the costs of social engagements and travel much more carefully. And we’ll need to take a hard look at how our finances have transformed over the past year, as well as how we might improve our financial wellness moving forward.

One key part of financial wellness: consolidation.

Think of financial consolidation as the Marie Kondo-ing of your investment accounts. The ultimate spring cleaning … of your money. And let’s be honest, there might be a lot to tidy up! In the US, the average Baby Boomer has changed jobs 12 times during the course of their career. This often results in multiple retirement accounts across multiple former employers and financial institutions. And when you factor in non-retirement accounts — like bank accounts, taxable investment accounts, and trusts — it’s no wonder how easy it is to lose track of them all.

The good news is that consolidating your accounts can help give you greater agency over your money in the long run.

Why should I consolidate my accounts?

• Your money should be working for you. When you consolidate your investments, you make them easier to view and manage. This can help you monitor your asset allocation, streamline portfolio rebalancing, and create a tax strategy. And if you have a concentrated stock position, working with an advisor who has oversight of your broader investments can help you establish an action plan to diversify that position over time. Put simply, consolidating accounts makes you a more nimble investor.

• Simplify your retirement and estate planning. Consolidating retirement accounts, in particular, can help you map out big retirement-related considerations like wealth decumulation, required minimum distributions (RMDs), and your giving strategy over time. And consolidation in general can help you streamline account details like personal information and beneficiary designations — key things to keep up to date as part of your broader estate-planning approach.

• Reduce fees. Most financial advisors charge a tiered portfolio advisory fee based on your total assets under management — but these fee tiers typically decrease as your assets under management increase. This means that if you combine accounts, you could pay fewer fees overall.

What accounts can I consolidate?

• Retirement investment accounts. You can consolidate most retirement accounts in your name — including traditional IRAs, SIMPLE IRAs (after two years), 401(k)s (see the “things to keep in mind when investing” section below), 457(b) plans, Qualified plans, and 403(b) plans — by “rolling over” these funds into a traditional IRA. Designated Roth accounts and Roth IRAs can also be rolled over into a single Roth IRA. Rollovers just require you to deposit your retirement assets into another retirement plan / IRA within 60 days in order to ensure the money remains tax-deferred. Full rollover rules are detailed by the IRS here.

• Taxable investment accounts. Non-retirement accounts can also be consolidated. As I mentioned above, merging your own individual accounts can make it easier to keep track of your assets and could potentially reduce the fees you pay. But you can also combine your individual investment accounts with someone else's to form a joint investment account. Joint accounts are most commonly held by spouses, but they can be opened by family members or investing partners, too. Combining the ownership of financial assets with another person is called joint tenancy. You just need to designate whether the type of joint account ownership is joint tenants with rights of survivorship or joint tenants in common. This titling determines how the assets are split should a joint account owner pass away.

What accounts can’t be consolidated?

• Spouses’ IRAs. While married individuals can each have multiple retirement accounts, joint or combined retirement accounts are not allowed. That said, couples where one individual has low or no earned income can consider setting up a spousal IRA.

• Inherited IRAs. Inheritance tax laws don’t let you roll over an inherited IRA into your own IRA, unless you inherited the IRA from a spouse. In all other cases, you’ll have to open an inherited IRA account in the name of the deceased with you as the beneficiary, and you’ll be held to certain withdrawal rules.

• Taxable accounts. You can’t consolidate trusts with different tax IDs or with registrations that have different trustees. Talk with an estate planning attorney to determine which assets might be best to put into the name of a trust. Note: You may not be able to consolidate other taxable accounts (individual, joint, living trust, etc.) with irrevocable or inherited trusts.

Things to keep in mind when consolidating

• 401(k) nuances. Some 401(k)s contain a traditional (pre-tax) component and Roth (post-tax) component — like if you elected to contribute to a Roth and your employer match went into a traditional. In order to roll those funds over, you will need to open up both a traditional IRA and a Roth IRA.

• Rollover limits. You can only do an indirect rollover from one IRA into another IRA once a year. That’s not once per calendar year, or even once per tax year — it’s once per rolling 12-month period. This applies whether it’s traditional-to-traditional or Roth-to-Roth. That said, direct rollovers and traditional-to-Roth conversions don’t count, which means you can initiate as many of those as you like. (Rollovers from your employer retirement plan, like a 401(k), to an IRA don’t count, either — those are different.)

• Know your (consolidation) partner! A consolidation strategy is only as good as the investment partner you choose to consolidate with. Like with any partnership, ask as many questions as possible before committing. We suggest starting with: Are you a fiduciary? What type of accounts can I open here? Who is your custodian? How do you protect my assets? Are you able to transfer my investments in-kind? Do you offer financial planning? What is your service model? What is your fee structure?

Where do I start?

Talk to the Ellevest Private Wealth Management team. Seriously — we obsess about our clients and how to make their money work best for them. Typically, we’ll start with a conversation about your overall financial situation to get a clear understanding of your needs and goals. We’ll review and map out your existing accounts and asset allocation, and then put together an investment proposal for how we might work together. Should you move forward with Ellevest Private Wealth, our service team removes the heavy lifting from the process to help you open accounts and transition assets, all the while taking taxes and transaction costs into account.

Whatever you decide, we hope this breakdown can set you on the path toward a healthier, tidier financial picture. Happy spring cleaning!

Disclosures