With the increase in job-hopping among Americans post-Great Resignation, the prevalence of “forgotten” 401(k) accounts has surged. In 2023, approximately 29.2 million 401(k) accounts were left behind, totaling around $1.65 trillion in assets—a 20% increase from two years prior, according to Capitalize. Nearly half of employees tend to leave their old 401(k) funds during job transitions.
However, this can lead to significant unintended costs. A 2021 U.S. Government Accountability Office survey revealed that 41% of workers don’t realize they pay 401(k) fees, which can include maintenance and investment management costs. For those who leave their funds, hidden fees may apply; for instance, a $4.55 monthly maintenance fee could result in nearly $18,000 lost over time. Experts caution that while maintaining old plans may seem easier, the fees can severely impact long-term savings.
When employees switch jobs, they can choose to transfer their 401(k) to a new employer or roll it into an Individual Retirement Account (IRA). Yet, IRAs often carry higher fees, potentially costing workers $45.5 billion in additional fees over a 25-year retirement period, as estimated by The Pew Charitable Trusts. Cashing out, while an option, incurs hefty tax penalties and is generally advised against.
To locate forgotten 401(k)s, workers can utilize resources such as the Department of Labor’s retirement savings lost and found database or the National Registry of Unclaimed Retirement Benefits. New initiatives like the Portability Services Network aim to facilitate the automatic transfer of small-balance 401(k)s to new employers, promoting the consolidation of retirement savings and helping prevent loss during job changes.
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