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Share Your Thoughts: Simplify or diversify?

June 30th, 2011 at 02:19 pm

I've been mulling over several interesting topics, so maybe I'll do more than one of these this month. We'll see.

Anyway, this one was kind of spur-of-the-moment. My office's annual seminar with our retirement provider (Prudential) is coming up, and one of the emails they sent in preparation was titled "It's time to simplify your retirement planning."

It went on to talk about rolling other retirement assets into my work 401(k) because it makes it easier to monitor.

Here's the thing: I recently opened Vanguard Roth IRAs for my family, and I was thinking of starting some Pax World mutual funds for us soon, too. I don't know exactly how retirement is going to look: tax implications if we retire in the UK, general course of this crazy economy, etc. I figured several different kinds of accounts couldn't hurt. It's a little more complicated to keep track of, though. If there wasn't any benefit, I'm not sure I'd keep it up.

So what do you think? Simplify or diversify? And what do you do? And if your philosophy is different from your practice, why? Are there pros and cons for each school of thought?

Feel free to comment on this entry or write your answer on your own blog if you're interested!

6 Responses to “Share Your Thoughts: Simplify or diversify?”

  1. ThriftoRama Says:

    I try to simplify, as well as diversify. It can happen. Mutual funds can make both of those happen. We used to own a lot of individual stocks and it was a nightmare as far as accounting and taxes, etc, but we are slowly switching to Vanguard mutual funds which give me more diversity, but are much much much easier to keep track of. Do not roll anything into your work 401k, though. Prudential just wants you to do that so you can pay a lot of fees-- most hidden.

  2. Petunia 100 Says:

    I like to simplify, but only when it makes sense. It does not make sense to roll IRAs (which can be low cost if one chooses well, and YOU have) into a 401k plan which typically has very high fees. Prudential wants you to "simplify" by paying them more fees. That helps Prudential, not Cee Jay and family.

  3. Miz Pat Says:

    I have 10 years till I hit 65 and I wish I had a fully funded roth under my belt instead of it all being in my 401K

  4. Single Guy Says:

    I agree its great if you can do both. I have rolled 401(k)s into my current 457 retirement plan which has helped tracking (simplify). Also as I am with a large employer, they have much better fees than most small company plans (cheaper). Also diversify between pre and post tax vehicles as that should help down the road (diversify). IRAs gernally let you invest in anything, which can be a super plus too (diversify but adds some risk). Well I guess all I've said is you need to look to your situation and risk tolerance and go from there. Sorry I can't be a better help.

  5. MonkeyMama Says:

    When I saw the title, I thought, "BOTH!"

    I think I have been simplifying moving to more "Retirement Target" funds and "Funds of funds" rather than manage everything on my own. On the flip side, I like to diversify with different custodians (Fidelity, VG, T Rowe, etc.). I just don't like all my eggs in one basket.

    In addition, consider the source of any advice. I would advise against moving all your money into a work retirement plan. It is VERY restrictive, and there are hidden fees when it comes to those kinds of plans. I would take an IRA ANY DAY. You can move it anywhere at any time, in comparison. I can't imagine how you would possibly save money by restricting yourself in a work plan. The only possible benefit would be "To have it all in one place."

    The more money you move to Prudential, the more money Prudential makes. Plain and simple. Take their sell with a grain of salt.

  6. baselle Says:

    I'm trying to do both - coalesce everything non-work 403B into Vanguard, then the work 403B. When I leave work or retire, I'm rolling all the 403B into a Vanguard IRA. I have to agree with everybody here - you have to be your own fiduciary.

    Another thought is a variant on the basic core and spoke portfolio. If you have a number of itty bitty accounts in different places, each of those accounts can be 100% in one holding, forming your spokes. For example, I still have about 6K in TIAA CREF. I like TIAA CREF and their fees are mostly reasonable. I'm toying with putting all of the 6K in their commercial real estate fund. At 100% it would not be diversified inside the fund, of course, but over my entire portfolio it would.

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