There is something important that I'd like you to do if you changed jobs sometime during your career. Please check on whether you "took" your 401(k) with you or left it behind on purpose -- or did you forget about it, leaving it lost, forlorn and perhaps abandoned?
Keeping in mind that surveys tell us that the 401(k) is one of the more valued perks for people seeking new jobs, how can one forget a 401(k)? According to a Charles Schwab survey of 401(k) plan participants (tinyurl.com/4dfajk6p), a 401(k) account ranks up there with health benefits as being a "must have" option when seeking new employment. In fact, a 401(k) plan (86%) and health insurance (84%) finished far ahead of life insurance, disability insurance and a health savings account in the survey.
Considering all the good things about a 401(k), just how big a problem is a lost 401(k)? Studies show that it's not uncommon.
Capitalize, a company that helps people roll over their 401(k)s, found an estimated 24.3 million "forgotten" 401(k) accounts in the U.S. as of May 2021, holding approximately $1.35 trillion in assets (tinyurl.com/ynhn76js).
I must say, those figures took me by surprise. How could that many accounts and that much money be forgotten about?
When you step back to get a bigger picture, this could be the answer: the number of times people change jobs.
The Bureau of Labor Statistics, in a longitudinal survey released in August (tinyurl.com/n29aff74), found that "Individuals born in the latter years of the baby boom (1957-1964) held an average of 12.4 jobs from ages 18 to 54." About half of those jobs were held between the ages of 18 and 24, according to the report. Again, these numbers are hard to believe, but they do put into context the possibility of forgotten 401(k)s.
The issue of 401(k)s (and other retirement plans) being left behind is important enough that House of Representatives bill H.R. 2954, "Securing a Strong Retirement Act of 2021" (tinyurl.com/6hv88dj4), sets up a "retirement savings lost and found" (Section 306). The lost and found would allow people to find their lost 401(k)s through an online searchable database. The bill also creates an Office of the Retirement Savings Lost and Found. The Senate has similar provisions in a bill titled "Retirement Security and Savings Act of 2021" (tinyurl.com/3wytad4f).
In the meantime, a free search tool is available through the National Association of Unclaimed Property Administrators, a network of the National Association of State Treasurers, at unclaimed.org. Another free site is the National Registry of Unclaimed Retirement Benefits (tinyurl.com/3xn9vc6z). You can find paid search tools as well by searching for "lost 401(k)."
There is another side to this conundrum. Companies that sponsor 401(k) plans are obligated to find missing 401(k) participants. Earlier this year, the Department of Labor issued best practices to follow to prevent losing track of participants, including red flags such as returned mail or uncashed checks (see tinyurl.com/kakzdb).
You would think that the IRS could help locate missing plan participants, but no longer, after 2012 (tinyurl.com/3pzt7yrr).
Another thought: Don't forget that an employer could close its business and terminate a 401(k). However, since 401(k)s are not the property of the business, your 401(k) does survive (tinyurl.com/2y5z8yz8). (Just be sure you are getting reports.)
Let me leave you with this thought, which I would love for you to share with everyone you know: When you change jobs, don't forget your 401(k). You can take it with you to your new employer (if the new plan permits), you can roll it over to an IRA or you can keep it with your old employer. If you do the latter, be sure to keep in touch with the recordkeepers of old 401(k)s. You'll need to keep them informed of every move you make. Make sure you continue to receive statements -- double-check every quarter.
Finally, let me remind you that 401(k) participants who understand their 401(k)s can prove it to themselves and others through an essay contest that I sponsor. Submit your essay at 401kchampion.com before Oct. 28 and compete to earn the title of 401(k) Champion.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (firstname.lastname@example.org). Please visit www.juliejason.com.
DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION