Do you have a lost 401(k)?

By: Kathryn Barnett

Take minute and think about how many places you have worked. Now, think about whether you contributed to a 401(k) at each of those places. Did you roll the contents of a previous 401(k) into your existing 401(k) or a rollover IRA?

According to Capitalize, as of May 2023 there are 29.2 million 401(k) accounts holding an approximate aggregate of $1.65 trillion in assets that have been left behind. The average balance of a single account was $56,616.00.

Could one of these accounts belong to you?

It may seem crazy to suggest the possibility of losing a 401(k) worth thousands of dollars. But what happens to many people is in the chaos of changing jobs they forget to ask about their retirement account because there are so many immediate issues at hand. Then, when starting your new job, there may have been a waiting period before you were opted in to your new employer’s plan, at which point 3 months or so could have lapsed since you left your previous employer and thought about that 401(k) you left behind.

The other issue is an individual will work somewhere for a year or less so the 401(k) account they were contributing to may not have a large balance. And again, when they change jobs, they may shrug off the account thinking it is not that much money because 401(k) accounts feel abstract, not tangible. In your twenties and thirties, $5,000-10,000.00 does not feel like a lot of money. However, given time to grow, an account that was worth $5,000.00 when you were 25 could be worth more than $100,000.00 once you reach 65 (assuming an 8% return).

How do you check to see if you have a lingering 401(k) account?

1. Make a list of all the places you have worked where you possibly contributed to a retirement plan.
2. After making that list, see if you have statements corresponding to each of those accounts or know where the contents of each of those accounts is currently, such as a rollover IRA account.
3. If you have statements identifying the location and contents of the accounts, skip to step 5 below.
4. If you do not have statements, here are some resources and suggestions to help you track down your missing account.

• Call your previous employer and ask for the 401(k) plan administrator’s information for the period you worked there. You can then call the plan administrator to ask if you currently have an account with them. 
• If you are unsure as to whether you had a plan , create a login for the government’s EBSA tool. You will need to verify your identity through Login.gov. – https://lostandfound.dol.gov/
• Another option is the National Registry of Unclaimed Retirement Benefits (NRURB). This is a privately maintained registry that will require your social security number. This registry will comb for assets in 401(k) accounts and other retirement accounts. – unclaimedretirementbenefits.com

You’ve found it. Now what?

Now, you choose to either roll the assets from that account into your existing 401(k) or to open a rollover IRA account and move the assets there. Neither of these options is a taxable event, but there are a few reasons to consider one each, which are listed below.

ROLLOVER IRA

Who is this good for? Individuals who are retiring; individuals who want more control over their investments; individuals who want easier access to their accounts

Pros

• Tax-deferred growth
• One place to consolidate existing 401(k) accounts, which leads to lower trustee costs
• Gives owner more control over investment strategy
• RMD will only be taken from IRA Rollover account, rather than multiple 401(k) accounts

Cons

• Management fees may be higher than those charged by 401(k) custodian
• Lose favorable tax treatment of net unrealized appreciation for employer securities.
• Inability to borrow against an IRA.

TRANSFER ASSETS TO NEW EMPLOYER’S PLAN

Who is this good for? Someone still working who does not want to open a Rollover IRA account but does want to consolidate their accounts

Pros

• Lower management fees
• Consolidation of retirement assets

Cons

• May be a waiting period before you can enroll
• Limited Investment Options
• Investment options may not be the same as your previous employer’s plan
• More paperwork involved to transfer previous account
• Lose favorable tax treatment of net unrealized appreciation for employer securities.

Working with a financial advisor is a good way to ensure you are making the best decision for your specific situation when choosing where and how to move retirement assets.

Capitalize Research Team (Ed.). (2023). The true cost of forgotten 401(k) accounts (2023) | capitalize. Capitalize . https://www.hicapitalize.com/wp-content/uploads/2023/06/The-true-cost-of-forgotten-401k-accounts-2023.pdf

A diversified portfolio does not assure a profit or protect against loss in a declining market.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Retirement plan withdrawals may be subject to taxation and penalties when withdrawn early