Millions of Americans are forgetting their retirement accounts
It has become harder for most Americans to save for retirement these days. With rising inflation, tight budgets, and job changes, it is easy for one to lose track of past retirement accounts. But the surprising truth is just how much money goes unclaimed.
A study conducted recently by Capitalize found that more than $2.1 trillion is distributed across almost 32 million lost or forgotten 401(k) accounts. These belong to persons who switched jobs, relocated, or simply forgot they ever invested money in a retirement plan.
To put it into perspective, that’s over $1.7 trillion in 2023 — that is, Americans left behind $400 billion more in just one year alone. That’s money that could truly make a difference for families saving for the future.
Why so many 401(k)s get lost
The largest cause of so many 401(k) plans falling through the cracks is this: workers change jobs and forget to take their money with them. When workers start a new job, they become busy getting acclimated and tend to overlook rolling over their old 401(k) plan into the new employer’s plan or into an IRA.
Some people don’t even realize they had money invested at all. Others think, “I’ll get to it later,” and never do. Over time, old accounts pile up — and managing multiple accounts from different jobs becomes confusing and costly.
In certain cases, if the account balance is small, an employer might automatically move the funds into a low-interest account or even cash it out, which could hurt your long-term savings.
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The problem with “portability”
One of the big reasons this problem keeps growing is that 401(k)s aren’t very portable. There isn’t a simple, automatic way to transfer cash from one plan to another when you switch jobs.
Few people are able to successfully roll over their funds on their own, Capitalize reports — and even then, it will take months to accomplish.
This non-portability is a hassle in terms of tracking and aggregation of accounts. It also thwarts the original purpose of a 401(k): compounding consistent retirement savings in the long run.
To address this, some private companies are now creating solutions like automatic portability, which automatically transfers small accounts (below $7,000) to an employee’s new 401(k) plan when they change employers. The goal is to stop retirement savings from falling into the cracks.
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How to check if you have a forgotten 401(k)
If you’ve ever worked for a company that offered a 401(k) plan, the odds are good you’ve got money waiting for you. Here’s how to check if it’s there:
National Registry of Unclaimed Retirement Benefits – You can search with just your Social Security number at no cost.
Retirement Savings Lost and Found Search System – A United States Department of Labor tool to help you locate unclaimed retirement savings.
MissingMoney.com – The official site for unclaimed U.S. and Canadian property, including retirement benefits.
If searching online fails, look at old paychecks, W-2s, or bank statements for deductions made for a 401(k). You can also contact former employers or call the financial institutions that administered their retirement plans, like Fidelity, Vanguard, or Charles Schwab.
Don’t leave your money behind
If you don’t feel like doing it yourself, services such as Capitalize and Beagle will hunt down lost 401(k)s on your behalf. Some are gratis, while others will cost you a small price tag.
The bottom line? Do-it-yourself or take advantage of the services, but don’t let your hard-earned money sit idle. That money could be working toward your retirement — not collecting dust in an account you can’t even recall.
Take a few minutes today to check. You might see a portion of your financial future waiting in the wings.
