Cleaning out Your Financial Junk Drawer

Cluttered kitchen drawer filled with a confusing jumble of everyday objects.

Cleaning out Your Financial Junk Drawer

 Mark Weil, CFP®, Wealth Advisor

May 10, 2019

Do you have that drawer in the kitchen with takeout menus from restaurants, pens from various businesses, and coupons that have expired? I do, and it’s called the junk drawer.

I see the financial equivalent of the junk drawer quite often. The “drawer” may have brokerage statements, wills, trusts, insurance policies, and many other documents that have sat dormant for years.

I recently started working with a family that had accumulated 30 different accounts over the years. Some were small accounts, and others were quite large with dozens of investments. They could not fully grasp their overall portfolio or know their exposure to risks and where there were gaps. To sort things out, we started by separating the accounts into two pools: retirement accounts and non-retirement accounts. Then we looked at their exposure to different asset classes. From there we could begin to determine which investments fit their current objectives, time horizon, and risk tolerance. We eventually consolidated their portfolio into a much more manageable number of accounts and appropriate asset allocation.

It’s a good idea from time to time to take that financial junk drawer, dump everything out, sort through what you have, what you still need, and what needs to have an exit strategy. Here are a few simple steps to help get yourself organized:

1. Consolidate Your Accounts

Just as I did with the family I mentioned above, an ideal place to start is organizing your accounts by how they are titled. According to the Bureau of Labor Statistics, the average worker born between 1957 and 1964 held 11.9 jobs from ages 18 to 501. That adds up to a lot of 401(k) accounts. If you have multiple accounts titled the same way, such as 401(k)s, you may be able to roll them over to a single account. This will allow you to see your investments on fewer statements and make it easier to view your portfolio.

2. Review/Create an Estate Plan

Another area that needs sorting is your estate plan. First, make sure you have one written down. According to a Gallup poll conducted in 2016, only 44% of Americans have a will2. You may not realize it, but you have an estate plan whether you documented it or not. If you don’t express your wishes through a will or trust, then the state will do it for you. If the state does your estate plan, they won’t take your preferences into account, it will be public, and may be expensive.

An estate plan isn’t something you need to look at on an annual basis. It is a good idea to review your estate plan every five years or whenever there is a significant change in your life, such as a birth, death, financial windfall or loss, or if there’s a change in estate laws.

3. Review/Update Your Beneficiary Designations

You also want to check to ensure the beneficiaries (primary and contingent) you named on your insurance policy and retirement accounts is still the person you want to benefit if you are not around. Are all of your family members accounted for in your designations and wishes? Do you want your ex-spouse to remain as your beneficiary?

Spring is not just an excellent time to clean out your garage, closet, or kitchen junk drawer – it is also the perfect time to review your financial junk drawer. Cleaning it out allows you to review the goals you set years ago and determine if they are still the same today. If your goals are still the same, it gives you the chance to view the progress you’ve made. If you need help sorting through what you have acquired along the way, we are happy to help.




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