Americans have a lot of money saved up in workplace retirement plans — around $10.4 trillion and counting.
Given that the average American has up to 12 jobs over a career, it’s not surprising that many people leave money behind when they switch.
It might be because you forgot about it and moved. Statements don’t automatically follow you and it’s easy to lose login information to old plan websites.
The problem is likely to get worse. Millions of Americans are now automatically entered into plans upon taking a new job.
It might also be that you don’t think there’s much money at stake. Maybe you stayed at a job for only a year and a few months. It’s easy to forget when the amounts taken from your check are small and deducted before you get paid.
Meanwhile, an astounding 25 million people left one or more retirement plan balances at an old job over a recent 10-year period studied by the Government Accountability Office.
It’s hard to say how much money is “lost” because once balances are above a certain threshold there’s little incentive for plan advisors to come find you. Even small balances from 10 years ago could have compounded into thousands of dollars.
You might think, well, that’s okay because I remember where I worked and feel okay about how I invested that money. I’ll get it eventually.
Here’s the rub: You might have invested that money properly for your goals when you were 25, but those choices might be very risky for you 20 years later.
Or, and this is a common problem, maybe you didn’t really invest at all. Maybe your savings is sitting in a cash account earning virtually nothing, year after year.
It’s usually better to keep your money close and under your watchful eye. So what can you do about potentially misplaced retirement money? Here are some suggestions.
First, get out your resume and jot down the names of your old employers. Call up their human resources offices and find out if your plan is still active and invested.
If you find that a former employer has switched providers, ask if all of the plan money was moved into the new provider. You want to find out where your money actually is today.
Once you know that, it’s a good idea to create a single bucket for all these old plans.
That might be your new employer 401(k), or it might be a personal IRA you open at a brokerage or a bank.
Either way, your next step is to roll over the funds into your new plan. This should happen with very little trouble and should not trigger any taxes or penalties, so long as you roll over the funds correctly.
Once the money is all in one place, it would be a good idea to reinvest it in a way that’s appropriate to your current financial reality.
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