How many jobs have you had over the past 20 years? Two, three? More?
The typical long-term career involves seven or more job “hops,” that is, moves not within one company but across an industry from one employer to another. Previous generations stayed with one company start to finish, but that’s no longer true.
In fact, U.S. government data suggests that for “young boomers” under 48, the number is more like almost 12 jobs. Some younger folks just assume they’ll last less than three years at a new employer, and their experience tends to back that up.
If you are a prudent, long-term saver, chances are you started off on the right foot at each of your old jobs, opening a 401(k) and joining the company health plan.
If that’s you, it’s very likely that you’ve left retirement money behind in each case. How much? Probably not enough to “worry about” but absolutely enough to matter to your retirement.
The problem is cost. Most small to medium-sized employers have expensive 401(k) plans. It’s only when the company has tens of thousands of employees do you find plans with costs that are aligned with the long-term goal of retirement.
It’s counterintuitive but true: Small-company employees who probably need the most help with retirement planning too often get the worst deal when it comes to their 401(k) plan. High fees and conflicted advice are the norm.
What can you do about it? First, take out your resume and look over all of the places you’ve worked over the years. Make a note of any at which you might have opened a retirement plan or had one opened for you by human resources.
Then, call them up. Your HR department will have all your records of past employment and benefits. Chances are they’ve changed their 401(k) provider but no matter, the money is still there.
If you find old savings sitting at a custodian, contact them and ask for information on how to do a rollover. The goal is to move the money out of the hands of your old, expensive 401(k) and into an IRA where you can manage the costs.
It might be a few thousand bucks or, with any luck and some years of compounding, even more. Every penny matters. Get all of your money into one bucket first, then take stock of how to manage it for your retirement.
If you are at a new employer, ask about the fees you pay for your current retirement plan. It might be reasonable to move your money into that plan and let them manage it.
However, the more likely outcome is that you’ll find the fees at your new employer are unacceptably high. You should be able to get management at well under 1%, including the cost of the mutual funds they buy in your name.
If not, consider instead managing it yourself using low-cost index funds. It’s not that hard to build a decent risk-adjusted portfolio using exchange-traded funds (ETFs) and rebalancing is not rocket science.
Costs matter. Fees matter. Leaving money behind in expensive 401(k) plans can be costly and a big mistake. Better to take action and take charge while you can.