PLANADVISER - Summer 2023 - 9

By consolidating her
four prior 401(k) accounts
together, Amala was able to
generate a larger balance and
keep on track for retirement.
ASSUMPTIONS
* Age at first job: 23
* Age of retirement: 65
* Salary at first job: $40,000
* Salary increase per year: 2.0
* Total employee + employer contribution
between ages 23
and 35: 3.0%
* Total employee + employer contribution
after age 35: 9.0%
* Changes jobs every 3 years
between age 23 and 35
(5 employers in total)
* Return on 401(k) investment: 6.0%
* Return on low-return2
rollover
investment: 1.0%
These hypothetical examples are for illustrative purposes only
and are not intended to predict the returns of any investment
choices. Rates of return will vary over time, particularly for
long-term investments. There is no guarantee the selected rate
of return can be achieved. Any investments may have fees and
expenses that are not taken into account, which would lower
the performance. Regular investing does not ensure a profit or
protect against loss in declining markets.
1 Source: Bureau of Labor Statistics, U.S.
Department of Labor, The Economics
Daily, Median tenure with current employer
was 4.1 years in January 2020
2
Source: Internal Revenue Service Notice
2005-5.
3
Source: MFS Global Retirement Survey,
US respondents. Q1: How important is it
for you to be able to consolidate all retirement
assets into one or as few accounts
as possible? Percentage represents the
sum of respondents that chose somewhat
important, very important or extremely
important.
Methodology: Dynata, an independent
third-party research provider, conducted
a study among 1,020 Defined Contribution
(DC) plan participants in the US on behalf
of MFS. MFS was not identified as the
sponsor of the study.
Understanding the impact of consolidating
Three hypothetical scenarios based on account with employer at age 65
n Account with final employer
n Accounts with prior employers
$700,000
$650,000
$550,000
$600,000
$500,000
$450,000
$400,000
SCENARIO 1
Leaves money in old
accounts entirely and
forgets about them
SCENARIO 2
Leaves accounts with
prior employers, and each
account is auto-rolled into
low return investment
SCENARIO 3
Rolls each account
into new employer's
plan
$555,968
$125,304 less
than Scenario 3
$98,656 less
than Scenario 3
$26,649
$681,273
$555,968
KEY TAKEAWAY
Your investment professional can help you
make an informed decision on whether
to leave retirement accounts with prior
employers or consolidate them, which can
be key to pursuing your retirement goals.
To qualify, DC plan participants had to be
ages 18+, employed at least part-time,
actively contributing to a 401(k), 403(b),
457, or 401(a). Data weighted to mirror the
age / gender distribution of the workforce.
The survey was fielded between March 31
and April 13, 2021.
There are advantages and disadvantages
to rolling money out of your employer's plan
and into an IRA. You will need to compare
such features as investment options,
services, fees and expenses, withdrawal
options, required minimum distributions,
tax treatment and your unique financial
needs and retirement goals. Please be
aware that rolling over retirement assets
into one IRA account could potentially
increase fees as the underlying funds may
be subject to sales loads, higher management
fees, 12b-1 fees, and IRA account
fees such as custodial fees. For assistance
in determining if a rollover to an IRA
is appropriate for you, consult your financial
advisor or investment professional.
The views expressed are those of MFS and
are subject to change at any time. These
views are for informational purposes only
and should not be relied upon as a recommendation
to purchase any security or as
a solicitation or investment advice from the
Advisor. No forecast can be guaranteed.
MFS does not provide legal, tax, or
accounting advice. Individuals should not
use or rely upon the information provided
herein without first consulting with their tax
or legal professional about their particular
circumstances. Any statement contained in
this communication (including any attachments)
concerning US tax matters was not
intended or written to be used, and cannot
be used, for the purpose of avoiding penalties
under the Internal Revenue Code.
MFS FUND DISTRIBUTORS, INC.
Awards & Innovation | Summer 2023 | planadviser.com 9
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PLANADVISER - Summer 2023

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