Do you have a ‘forgotten’ 401(k)?

Throughout their careers, baby boomers likely had many different jobs, and each of those jobs may have provided a retirement savings account. When the employee moves to a new job, they are usually allowed to take their 401(k) with them.

However, many didn’t. According to a recent estimate from Capitalize, a fintech company that tracks retirement rollovers, over 29 million 401(k) accounts — holding more than $1.65 trillion in assets — are considered “forgotten” or “left behind” by workers who have changed jobs and lost track of their retirement savings.

While switching jobs can bring salary increases, better benefits, or improved work-life balance, many employees neglect to roll over their retirement accounts when they leave a company. The result? Dormant 401(k)s that may underperform, rack up fees, or even be transferred to obscure holding accounts known as “safe harbor IRAs” — often with fewer investment options and higher costs.

How it happens

A 401(k) becomes “forgotten” not because it vanishes, but because of poor record-keeping or lack of awareness. When employees leave a job, it’s not uncommon for them to overlook transferring their retirement savings to a new plan or an IRA. Over time, name changes, address changes, and multiple job switches further complicate the issue.

Adding to the problem, employers may initiate forced rollovers for accounts with less than $5,000. These accounts are transferred into low-interest IRAs if the employee doesn’t provide rollover instructions. In worst-case scenarios, former employees may not even be aware that such a transfer has taken place.

Here’s what typically happens when a 401(k) is abandoned:

• Fees Accumulate: Many legacy plans or default IRAs charge management or administrative fees that slowly erode the account balance.
  
• Investment Stagnation: Funds may be placed in conservative, low-yield investments by default, limiting growth.
  
• Loss of Control: Without active management, forgotten accounts might not match the person’s current risk tolerance or retirement timeline.
  
• Tax Penalties: In rare cases, accounts may be cashed out involuntarily, triggering early withdrawal penalties and tax bills.

How to reclaim forgotten funds

If you suspect you may have left a 401(k) behind, here are steps you can take:

1. Check the National Registry of Unclaimed Retirement Benefits
   This free resource can help locate lost accounts using your Social Security number.
   
2. Contact Former Employers
   Reach out to the HR or benefits department of past employers. Be prepared to provide identifying information and employment dates.
   
3. Use the Department of Labor’s Form 5500 Database
   This database contains details on company retirement plans and can help you identify the plan administrator.
   
4. Roll Over to an IRA or Your Current Employer’s Plan
   Consolidating accounts makes tracking easier and may reduce fees. Most brokerage firms offer free rollover support.
   
5. Hire a Financial Advisor or Use a Rollover Service
   Firms like Capitalize, Beagle, and others specialize in finding and rolling over old 401(k) accounts with minimal hassle.