A Reader Question About Consolidating Retirement Accounts

Where should the money go?

A reader sent in the following question and asked for Team Billfold’s advice. None of us are certified financial advisors, and I would suggest that the reader talk to a fiduciary advisor or CPA (to discuss both the investment and its tax implications) but maybe the answers we provide can help the reader guide that conversation.

Here’s the question:

I recently received a letter informing me that there’s less than the required minimum ($1,000) in a retirement account I had completely forgotten I had. It’s worth about $375, and I guess I put money into it when I worked for a retail giant more than ten years ago. They’re going to disperse the money to me if I don’t tell them where else to send it. I don’t want the cash as I’m sure there will be a tax penalty for not reinvesting it.

Additionally, I have about $4,500 in a state retirement account from when I taught at a public high school for a year. I’m 32, and these are my only retirement funds. I don’t actively manage them at all.

I’d like to combine these moneys into one retirement account. My question is, what’s my best and smartest option for where I can reinvest these? A Roth IRA? A Vanguard account? Ideally it would be an account I could also add money to out-of-pocket as I work for a private person and don’t have access to an employer-related 401(k). I’d like to begin depositing money into an account, either monthly or yearly.

Thanks for any guidance you might have!

I’ll start off by noting that with a Roth IRA, the reader can invest in a Vanguard fund (if that’s what they end up deciding is best for them) as well as add money out-of-pocket either monthly or yearly until they hit the maximum annual contribution.

What else should the reader consider?

Support The Billfold

The Billfold continues to exist thanks to support from our readers. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal.