Coordinating Your Campus Retirement Accounts With the Rest of Your Portfolio
A long career in higher education has many rewards. It also has a side effect that few people notice until they stop to look: it tends to scatter your retirement savings across a remarkable number of separate accounts.
A typical university employee, mid-career, might hold a 403(b) at their current institution, a 457(b) alongside it, perhaps a defined-benefit pension or an optional retirement plan, one or more old accounts left behind at previous institutions, an IRA or two, a spouse's workplace plan, and a taxable investment account. Each was opened for a sensible reason. Together, they often add up to something less than the sum of their parts — because each is being managed in isolation, with no one looking at the whole.
This is the silo problem, and for the academic community, it is especially common. At The Legacy Foundation, helping university employees solve it is some of the most valuable work we do. Here is why coordination matters, and how to approach it.
Why scattered accounts underperform their potential
Several real problems grow out of an uncoordinated set of accounts.
The first is allocation. Your asset allocation — the mix of stocks, bonds, and other investments — is one of the most important drivers of your long-term results. But allocation only means something when it is measured across everything you own. If each account is set independently, you have no idea what your true, combined allocation actually is. You may be taking far more risk, or far less, than you intend — and you cannot correct a number you have never calculated.
The second is unintended concentration. Separate accounts, each chosen on its own, frequently end up holding many of the same popular investments. The result is a portfolio that looks varied account by account but is concentrated when viewed as a whole — the illusion of diversification we have written about before.
The third is tax efficiency. Different accounts are taxed in different ways. A 403(b) or 457(b), a Roth account, and a taxable brokerage account each have distinct tax treatment, and that means certain investments are better suited to certain account types. Deciding which assets to hold where — sometimes called asset location — is an opportunity that simply cannot exist when each account is managed as an island.
And the fourth is the forgotten account. The retirement plan left behind at a former institution is one of the most common loose ends we see. It is rarely reviewed, sometimes barely remembered, and almost never integrated into any current strategy. Money that is out of sight tends to stay out of strategy.
How to bring it all together
Coordination does not require consolidating everything into one account — that is not always possible or even advisable. It requires managing everything according to one plan. The process looks like this.
The Legacy Foundation, through our planning tool, takes an inventory of all accounts and identifies what role it will play in your portfolio line-up. For many people, simply seeing the full list in one place is a revelation. We then make prudent decisions as to what type of assets should be in each account based on several factors, such as tax planning, retirement income, savings, or estate planning.
From there, we place your investments thoughtfully across account types, using each account's tax treatment to your advantage rather than ignoring it. Consider, too, whether old accounts from previous institutions should be consolidated to simplify your financial life and bring those dollars under the same strategy.
Finally, your financial advocate at The Legacy Foundation will review the whole picture on a regular basis, rebalancing across accounts so the portfolio stays aligned with its design.
Final Thought
University benefits are genuinely generous — the 403(b) and 457(b) pairing in particular is a powerful combination not available to many workers outside higher education. But generous benefits only become a strong retirement when they are organized into one coherent strategy rather than left as a drawer full of separate parts.
That coordination is precisely the work The Legacy Foundation specializes in for the university community. If your retirement savings have scattered over the course of your career, this summer is an excellent time to gather them back into a single, intentional plan.
Complementary Portfolio Review
We understand that taking the first step toward financial planning can feel overwhelming. That’s why we offer portfolio reviews to anyone looking for thoughtful financial guidance—something we’ve been helping individuals and families navigate for more than 35 years.
Disclaimer:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing in mutual funds involves risk, including possible loss of principal. An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. No strategy assures success or protects against loss.