Our financial experts help you prepare for retirement in just three easy steps.

By Emma Johnson
Updated September 14, 2012

You tried to be good. When experts told you to invest in your 401(k) or 403(b) to save for retirement, you did it. Then you changed jobs and did it again. And again. Now, despite your best intentions, you’ve ended up with a confounding number of accounts with various institutions. This “financial clutter” phenomenon happens more often than you would think and can be a real problem. Why? If you have too many accounts, you might not realize when you’ve hit a money goal or, conversely, if an investment is tanking. Even worse, you could forget about one of your accounts, says Michael B. Rubin, a certified financial planner and a certified public accountant in Portsmouth, New Hampshire. Fortunately, it’s easy to simplify your retirement holdings. Here’s how.

Step 1: Consolidate

Ideally, you should have only one employer-sponsored retirement account. Not the case? Take action. If you’re allowed to transfer the balance of your preexisting accounts into your current employer’s plan, consider doing so, says Rubin. Otherwise, roll the money in your old accounts into a traditional IRA. (For either of these tasks, you can ask the brokerage company that manages your current employer’s plan for assistance.) One important note: When you transfer or withdraw funds from the old accounts, make certain those financial institutions write checks out to the new brokerage firm for your benefit—not to you. If the check is payable to you, you could get hit with penalties and taxes, says Rubin, since technically the money was withdrawn before you reached retirement age.

Step 2: Allocate Smartly

Now is the time to assess how your investments are doing. Ask yourself if you want to be risky and invest mainly in stocks, or play it safe by keeping most of your savings in bonds. Rubin recommends the Bankrate.com Asset Allocation Calculator, which uses several factors, including your age, assets, and risk tolerance, to determine how to invest your savings. Then make sure those allocations are reflected in your current IRA or employer-based retirement account. (Alternatively, ask for advice from your brokerage company.)

Step 3: Forget About It

Don’t check in frequently on your accounts. Set up an annual reminder on your calendar to rebalance your retirement portfolio according to your goals. The rest of the time, try not to think about it. Benign neglect can be a good thing, says Tim Meisenheimer, a financial adviser with Streamline Financial Services, in Naperville, Illinois: You’ll avoid the urge to unload your holdings if the stock market has a downturn.