Don't Let Your Retirement Savings Slip Away: Track Down Lost 401(k) and IRA Accounts
By all accounts, the days of an employee spending 40 or more years with a single employer are things of the past. Whether it’s due to corporate downsizing, the need for personal and professional development, or another reason, most people change employers multiple times throughout their working years. As the American job market continues to become more fast-paced, that trend is likely to continue growing.
While there’s certainly nothing wrong with changing jobs, moving on to different companies, and pursuing new opportunities, it does present some potential issues. Most notably, many people lose track of employer-sponsored 401(k) accounts and other retirement benefits. That is why there is more than $1.7 trillion in lost or forgotten retirement accounts today. To further break that number down, the average unclaimed balance is $56,616. It is believed that there are roughly 29 million accounts that have been forgotten, which leads to such a staggering amount of money sitting idle.
Is there some sort of retirement savings lost and found that you can go search to reclaim your money? In a sense, yes. Today, learn more about how to track down old 401(k) accounts and reclaim forgotten retirement funds.
Why So Many Retirement Accounts Get Lost
Before we dive into what you should do about your unclaimed retirement savings, let’s take a look at how this problem has become so prevalent. According to studies published by AARP, the average American who was born between 1957 and 1964 has changed employers 12 times. However, it’s not only that generation that is making moves. A record 47 million Americans left their jobs during the Great Resignation of 2021.
Generally speaking, when someone leaves one job, they have a lot of other things going on. Whether it’s moving back home to care for an aging loved one, walking away from a toxic work environment, or simply pursuing better opportunities, many people don’t think about the things that they’re leaving behind. No, this doesn’t refer to the coffee mug that you use to hold ink pens on your desk. Instead, it’s about retirement accounts that you and your employer paid into during your employment.
If you’re leaving a job after only a year or two, you may only have a couple thousand dollars in your retirement account. During the stress of a job change, especially one that involves a lot of other life changes, it’s easy to forget about that money, especially if it's an amount that you don’t consider to be significant.
While many people don’t consider the money worth the hassle of going through a rollover process, the value increases over time. Since most retirement accounts rely heavily on stock market investments, the $2,000 that you’ve forgotten about from your first employer might be much closer to $20,000 today. According to James Royal, an investment analyst at Bankrate, “Even 10 or 15 years ago, if you put in $5, $6, $7,000, that could be worth three, four or five times as much today.”
On the surface, it seems unthinkable that you could have $56,000 in unclaimed funds sitting in an account that you forgot about. However, when you consider how easy it is to forget about smaller sums of money in the chaos of a job change, you may find that it’s worth looking into.
How to Track Down Old 401(k) Accounts
Finding lost 401(k) accounts has never been easier than it is today. You can begin your search by visiting the National Registry of Unclaimed Retirement Benefits. The website is incredibly easy to use, as you simply enter your Social Security number into the search bar. When you click “search,” the portal does the rest of the work. You’ll know within seconds whether any unclaimed retirement accounts that are attached to your SSN exist.
Even if you don’t see anything there, your search doesn’t have to come to an end. Thanks to the introduction of the SECURE 2.0 Act, Uncle Sam is actually stepping in to help people find the funds that rightfully belong to them. The SECURE 2.0 Act runs through the U.S. Department of Labor, which has introduced the Retirement Savings Lost and Found Database. This national online search tool helps you track down your old 401(k) and IRA accounts.
The tool is completely free to use, and helps connect account holders with the plan administrators and financial institutions who oversee their retirement accounts. You can think of this tool as a missing money database that focuses only on retirement accounts. The new system is still being rolled out in phases, so if you don’t see any of your accounts there today, make plans to check back monthly for the next year or so.
Rita Assaf, the vice president of retirement savings at Fidelity, points out that the lost and found site is “still trying to reach scale with a lot of providers.” However, Assaf, as well as some of the other leading names in the industry, believe that it will be a powerful tool once it reaches its potential.
Finally, Missing Money is a clearinghouse for unclaimed property held by U.S. states and provinces in Canada. While Missing Money doesn’t only focus on retirement accounts, it’s another platform that you can use to find retirement accounts and other assets that you have forgotten.
Ultimately, there’s simply no reason not to check into these platforms. If you left a personal item at a restaurant or store, you would likely go back to check the lost and found to see if it had been turned in. Why would you not want to do the same when it comes to potentially thousands of dollars that rightfully belong to you?
Other Ways to Find Your Lost Retirement Accounts
What if you can’t find any information about lost retirement accounts on the websites we’ve discussed? Does that mean that you don’t have any missing money? While not all of these online databases are as new as the Labor Department’s database, the fact remains that not every online portal has access to every retirement account. If you don’t see any information about lost retirement accounts there, you can put in some work to keep the search alive.
Start by contacting former employers directly. Most companies delegate benefit management to the HR department, so that’s a great place to start. Even if the human resources department at your former employer doesn’t have access to your retirement account, they can usually tell you who the plan provider is and the best way to get in touch with them.
Depending on how long it’s been since you left the company, you may also need to go through your state to look for missing funds. Every state in the US has an unclaimed property office, and in many states, financial institutions are legally required to turn over dormant accounts to those offices after a certain number of years. Depending on state laws and the plan provider that you’re dealing with, you may find that you have thousands of dollars sitting in an account that has now been turned over to your state. Even if you don’t find a forgotten retirement account, you may find other assets that you either didn’t know about or have forgotten about over the years.
Finally, take a look at the Department of Labor’s Form 5500 Database. This is a more technical approach, but you can find lots of information about retirement plans filed by employers. While the Form 5500 Database is the least likely place to find account information, if you’re determined, it can be worth a look.
What To Do When You Find Unclaimed Retirement Savings
Let’s assume that you’ve found some unclaimed retirement savings, whether on an online portal or by making some important phone calls. What do you do next? Ultimately, the answer to that question depends on a number of factors.
First, you’ll need to consider your age. If you withdraw funds before you’re 59 ½ years old, you’ll likely trigger penalties and have to pay income taxes on the accounts. Unless you need to access the funds for an emergency, it’s best to leave your retirement funds in place for a while. As tempting as it can be to “cash out,” remember that you’ve just found this money, so it’s not like you’re missing out on anything.
One of the smartest moves that you can make when you find missing retirement money is to roll it over into your current retirement account. Whether it’s an IRA or a 401(k), you can combine the money in your forgotten account with your current account. When you consolidate the accounts, you make it easier to manage your investments while reducing the likelihood of forgetting about them again in the future. It can also help reduce maintenance fees, which allows you to keep more of your money.
Once you’ve recovered your account, set a reminder to check it once or twice a year. While retirement accounts don’t have to be monitored constantly, a couple of quick logins each year ensures that your contact information is up to date and your investments align with the goals that you’ve set for the future.
Why This Matters More Than Ever
It has never been more important for people to reclaim forgotten retirement funds than it is right now. Americans are living longer, and the burden of planning for retirement has shifted onto individuals. Pensions are largely a thing of the past, and the future of Social Security is in jeopardy, which means you need to make the most of every dollar that you have at your disposal.
When you’re in your 20s or 30s, losing track of a retirement account with $2,500 doesn’t seem like a big deal. However, by the time you reach your 40s, and that retirement account is worth $12,000, it becomes an important part of your financial future.
The money in your forgotten retirement accounts is yours, no matter how long it’s been since you checked in on it. Even if you’re certain that you haven’t left any money behind during a job change, take a few minutes to check the resources that are available to you. Any money that you find today can help you make a better tomorrow for yourself.