Saturday Critical Action – Eliminate Duplication
Welcome to the Saturday Critical Action. Each Saturday we take the weekly action from Jonathan Clements‘ blog Humble Dollar and “militarize” it for you. Jonathan Clements was a longtime personal finance columnist for The Wall Street Journal, and he offers great advice at the best price you can get…free. Here is this week’s critical action:
ELIMINATE DUPLICATION. Many folks have multiple bank and brokerage accounts, multiple funds that invest in the same market sector and even multiple advisors. This can make sense if, say, the goal is to increase FDIC insurance. But often it reflects a naïve notion of diversification—that more accounts somehow mean greater safety. Our advice: Simplify—for your sake and the sake of your heirs.
I totally agree with this. My financial life is relatively simple. We only have our investments in three places – the Thrift Savings Plan (TSP), Vanguard, and John Hancock. The last one is only because my wife’s employer uses John Hancock for their 401k. As soon as the job goes, so will that account as I roll it into the TSP or a Vanguard account.
Yes, you can rollover money from other retirement accounts into the TSP. Even if you get out of the military, keep the TSP and use it to rollover accounts. You won’t find a lower cost option anywhere.
To me, you only need to use one investment company in addition to the TSP. While Vanguard is my choice and what I recommend, there are certainly others. Just make sure that you keep an eye on your investment costs. If you use Vanguard, you know they’ll be among the lowest cost investments no matter what you pick. While some investment companies have index funds that are even lower in cost than Vanguard’s, their other funds are probably more expensive than the similar investment at Vanguard.