How Consolidating 5 Accounts Into 1 Saved This Couple $12,000

The Hidden Costs of Multiple Retirement Accounts

When David and Maria Chen sat down for their first meeting with a fee-only financial advisor, they brought statements from five different retirement accounts: David’s current 401(k), his old 401(k) from a previous employer, Maria’s 403(b), her old 401(k), and a Roth IRA they’d opened years ago and forgotten about.

Total balance: $890,000. Total annual fees: $14,200. Their advisor’s first recommendation: consolidate.

Where the Money Was Going

David’s current 401(k) had reasonable fees—0.45% total cost. But the old 401(k) he’d left at a previous employer was charging 1.2% annually. Maria’s 403(b) was even worse: actively managed funds averaging 1.4% expense ratios plus a 0.3% administrative fee.

Annual fee breakdown before consolidation:

• David’s current 401(k) ($280,000): $1,260
• David’s old 401(k) ($210,000): $2,520
• Maria’s 403(b) ($285,000): $4,845
• Maria’s old 401(k) ($95,000): $1,425
• Forgotten Roth IRA ($20,000): $300
• Total annual fees: $10,350

The Consolidation Strategy

The advisor recommended rolling all legacy accounts into two IRAs at Fidelity—one traditional, one Roth. David kept his current 401(k) active since he was still employed there and the fees were acceptable.

New structure:

• David’s current 401(k): unchanged ($280,000)
• Joint traditional IRA (rolled-over funds): $590,000
• Roth IRA (existing plus potential conversions): $20,000+

The consolidated IRA invested in three low-cost index funds: Fidelity ZERO Total Market (0.00%), Fidelity ZERO International (0.00%), and Fidelity U.S. Bond Index (0.025%).

Annual fees after consolidation:

• David’s current 401(k): $1,260
• Consolidated IRA: $148 (0.025% weighted average)
• Roth IRA: $0 (ZERO funds)
• Total annual fees: $1,408

Annual savings: $8,942

Beyond Fees: The Simplification Dividend

The Chens discovered other benefits from consolidation:

Easier RMD management: When they reach 73, calculating required minimum distributions from one IRA is straightforward. With multiple accounts, each had different rules and deadlines.

Simplified beneficiary updates: One beneficiary form to maintain instead of five. One annual review instead of chasing down multiple custodians.

Clearer asset allocation: With funds scattered across accounts, they had accidentally over-weighted large-cap stocks and under-weighted international exposure. A single account made the overall picture clear.

Better tax planning: Their advisor could now implement tax-loss harvesting and Roth conversion strategies across a unified portfolio.

The Long-Term Impact

The Chens were 52 years old. Assuming their portfolio grows at 7% annually and they continue saving until 65:

Old structure (1.6% average fees): Projected balance at 65: $1,680,000

Consolidated structure (0.25% average fees): Projected balance at 65: $1,920,000

Difference: $240,000

Add another decade of retirement growth, and the difference compounds further. By age 75, the consolidated approach projects approximately $340,000 more in assets.

How to Replicate This

Step 1: Gather statements from all retirement accounts. Calculate the total expense ratio for each (fund expenses plus administrative fees).

Step 2: Compare to low-cost alternatives. Fidelity, Vanguard, and Schwab all offer index funds with expense ratios under 0.10%.

Step 3: Contact your new custodian to initiate direct rollovers. Most provide dedicated support for consolidation.

Step 4: Once consolidated, establish a simple, diversified portfolio. Three to four low-cost index funds typically suffice.

Step 5: Set up automatic rebalancing or invest in a target-date fund for hands-off management.

The Procrastination Problem

Most people know they should consolidate their old 401(k)s. It’s on their to-do list. They’ll get to it eventually.

Every year of delay costs money. The Chens were paying $8,900 annually in excess fees. Each year they delayed was another $8,900 lost to the financial services industry instead of compounding in their portfolio.

The rollover process takes approximately 2-4 weeks. The paperwork requires perhaps 2 hours of your time. The potential savings over a retirement lifetime: hundreds of thousands of dollars. The math is clear. The only question is when you’ll act.