You probably have multiple 401K accounts if you’ve worked for numerous companies in corporate America. If this is the case, you’re not the exception. Most of us in this category have multiple retirement accounts, which we may have ignored for so many years. I don’t know if it’s because of procrastination and the amount of paperwork we have to deal with, but somehow, we put off consolidating retirement accounts and good care of our biggest and precious asset following our home mortgage.
I once tried to consolidate my existing 401K accounts and was bounced in between my existing and previous companies. They both asked me to get the documents signed by the other company first. I never gave up and was finally able to consolidate both retirement accounts after many months. I’m now again in the same situation as my previous 401K account is sitting idle and poorly managed by the financial institution and myself.
There are many risks involved when we give up proper management of our retirement accounts:
First, there may be high costs involved for managing the accounts which get deducted from the account balance,
Second, the retirement accounts might be performing poorly due to limited investment options and poor oversight by the investment company as well as on our part, and
Third, the accounts might be accessed by unauthorized individuals to make transfers or change the beneficiary information. I see two major issues with this risk; first, we will not detect the unauthorized change or transaction soon enough since we would rarely check the account information as we have multiple 401K accounts leaving us with less dollars for retirement, and second, we may end up dead once the beneficiary information is changed to distribute the account balance to the fraudster after our death. After all, what good is the beneficiary information if the 401K account holder is still alive!
If a financial loss is not a motivating factor for you to consolidate your multiple 401K accounts and protect them from unauthorized access, think about your life. If you prevent fraudsters to change your retirement account beneficiary information or at least you limit the risk and detect the change soon enough, you can save your life since your death will not benefit the stranger.
In conclusion, below are some of my recommendations:
1- Consolidate your 401K retirement accounts into one single IRA account no matter how much time and paperwork it might involve. Not only you will greatly reduce your risk of identity theft by not having multiple accounts and passwords, but you will also allow yourself to properly and periodically manage your consolidated retirement account with a huge selection of investment options available in a single IRA account. You will also eliminate the additional fees charged to maintain the various accounts.
2- Select a strong password for your IRA account to protect against any unauthorized financial loss or information change,
3- Select a beneficiary for your retirement account and update the information as your situation changes. I’ve heard of a case where the husband did not get a penny following his wife’s death because the beneficiary (her sister) was selected before their marriage and the beneficiary information was never updated after the marriage to replace the sister with the husband. Also for tax purposes, the financial experts recommend selecting a child or even a grandchild as a beneficiary to delay the tax liabilities for as long as possible.
Effective identity protection requires dynamic and integrated solutions. This site provides awareness, education and many solutions to address the growing problem of identity theft. Please sign up for the Identity Protection Insights newsletter to receive periodic notification of important articles and solutions, major identity theft news analysis, fraud alerts, and other service announcements.