Financial Simplicity Should be a Retirement Priority
Enticing sign up offers tempt us to open new accounts all the time. We might get a few hundred dollars to switch brokerages and $50 to open a checking account and end up with a complex mess of financial accounts. This hinders not only our ability to see the big picture, but the maze of complex rules can also get us in trouble in retirement. Here's why you need to simplify your investments before retirement:
You will have more difficulty spotting a mistake. It would be hard to double check every credit card bill if you had 17 different cards. Those who have only one credit card can much more easily check the transactions. With fewer accounts, you are also more likely to remember the due dates and whether you made payments, thus avoiding late fees.
Fewer accounts means lower fees. Those who have accumulated enough money to retire often qualify for seldom advertised perks. Most financial institutions give more benefits to customers who have more assets held with the firm. Free checking, lower mortgage rates and smaller investment fees are among the perks offered to people who maintain a large balance at a single financial institution.
You get better service. You may not need customer service when you complete most of your financial transactions online. However, access to personalized customer service may come in handy when something goes wrong. It's much easier when someone on the inside is trying to work out a problem for you.
You may lose the ability to deal with complications. It won't happen overnight, but everybody slowly loses his or her ability to manage complexity. The bigger the mess, the more brain power required to even remember it all. With too many accounts scattered all over the place, you may not be able to properly manage the moving parts.
Your heirs won't want to deal with it. Micromanaging your investments may be your life calling, but your complex web of accounts will come crashing down on your children when the whole situation is thrust upon your heirs. No matter how obvious you feel you've spelled things out, everything will be brand new and hard to comprehend for a third party. The simpler you can make your finances, the more your heirs will get to keep, as they won't need to spend precious time trying to understand everything.
There's more time to optimize with less complexity. Being able to handle the complications isn't good enough, because the time you spend juggling could be spent finding new ways to optimize your finances instead. Are you in the cheapest investment for the asset class you want included in your portfolio? Are you filing for all the tax deductions you are eligible for? Every move you make will take time to research and implement. You can gain back time in your day by having simpler finances.
Who wants to manage the complexity in retirement anyway? Retirement is a time to kick back and relax. You certainly don't want to spend too much time making sure all of your accounts are being managed properly. If you reduce the number of accounts necessary to make your finances tick you will have more time to pursue what's truly important.
David Ning is the founder of MoneyNing.com .
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