December 19, 2024
How to recover and roll over forgotten funds #CashNews.co

How to recover and roll over forgotten funds #CashNews.co

Cash News

A typical worker will hold about 12 jobs during their careers, according to U.S. Bureau of Labor Statistics data. With all that turnover, a lot of 401(k) money gets lost in the shuffle. By some estimates, Americans have as much as $1.65 trillion lingering in old 401(k) accounts.

If you suspect you have forgotten 401(k) money out there, you’re in the right place. We’ll explain how to find old 401(k)s and your options for your retirement funds when you switch jobs.

Learn more: What is a 401(k)? A guide to the rules and how it works.

There are generally four ways you can care for your money in a 401(k) or 403(b) plan if you part ways with your employer.

Most plans allow you to keep your money invested if your balance is at least $7,000. Your savings will continue to grow on a tax-deferred basis through the power of compounding, but you can’t contribute to the account after you’ve left your job. And of course, you won’t receive employer matching contributions.

Learn more: How a 401(k) match works and why you should seek it out

You can roll over a 401(k) or 403(b) into an individual retirement account (IRA) at whatever brokerage you choose. If you have less than $7,000 in your account, your plan administrator can automatically roll over your balance into what’s called a safe harbor IRA. These accounts aren’t like regular IRAs that let you invest your funds in practically any stocks, bonds, or funds you choose. The default investment is typically ultra-low-risk money market funds that have minimal returns.

Learn more: 401(k) vs. IRA: The differences and how to choose which is right for you

If you get another job, you can usually roll over your 401(k) or 403(b) into your new employer’s plan, provided that their rules allow rollovers. You’ll typically want to do a direct rollover in this case, which means your old provider sends a check straight to the new provider. With an indirect rollover, where the plan administrator sends you the check, they’ll automatically withhold 20% of the balance for federal taxes. If you don’t redeposit the check within 60 days, it will be treated as an early withdrawal and subject to taxes and penalties.

The final option is to cash out your retirement account, which typically isn’t recommended. Not only could you face taxes and penalties if you’re younger than 59½, but you’ll also miss out on tax-deferred growth since your funds are no longer invested. If you have less than $1,000, your old plan can automatically cash you out and send you a check after withholding the mandatory 20% for taxes.

There’s no silver bullet strategy for finding all your old 401(k) accounts, but here are four strategies — three of which you can try immediately. The fourth option could be available by the end of 2024.

When you’re trying to track down an old 401(k), contacting past employers is usually the best place to start. Reach out to the company’s human resources department or the person who managed employee benefits to ask for the name of the plan administrator.

Not sure whether you had a 401(k) at a past job? Try looking back at your old W-2s. The form will show whether you participated in a workplace retirement plan during the tax year.

Several databases allow you to search for old 401(k)s, including:

  • National Registry of Unclaimed Retirement Benefits (NRURB): The NRURB database is managed by PenChecks, a major retirement benefits distribution processor. Past employers and financial institutions can register former plan participants on the site if they have unclaimed retirement funds. You can search using your Social Security number to see if a former employer or third-party custodian has registered you — though not all companies use the database.

  • U.S. Department of Labor’s Abandoned Plan Search: If a business closes or is involved in a merger or acquisition, it may terminate its 401(k) plan. You can use the U.S. Department of Labor’s Abandoned Plan Search tool to search for plans that have already been terminated or that have started the termination process.

  • Pension Benefit Guaranty Corporation (PBGC) database: The PBGC is a federal agency that protects retirement benefits for private-sector workers with traditional pension plans, i.e., those that promise a specific monthly benefit. If you have unclaimed pension benefits from a private company, you may be able to find them through the database by entering your last name and the last four digits of your Social Security number.

  • MissingMoney.com: It’s possible that your retirement funds wound up in the hands of your state’s treasurer, particularly if you had a small balance and your plan administrator cut you a check after being unable to locate you. MissingMoney.com is a database maintained by the National Association of State Treasurers that allows you to search for unclaimed money in all 50 states using your name. You may also find that you have other forgotten money from sources like old bank accounts, refunded security deposits, uncashed paychecks, and more.

A handful of private companies have tools that can help if you’re not sure how to find an old 401(k).

  • Beagle: Beagle is a service that helps you find your 401(k), determine how much you’re paying in fees, and roll over the account for a small monthly charge.

  • Capitalize: Capitalize is a company that specializes in 401(k) rollovers and has a database that can help you find your 401(k) for free and roll it over into an IRA through its third-party providers. A premium version is available for those who are willing to pay for additional services.

  • FreeErisa.com: FreeErisa.com is part of Judy Diamond Associates, a research firm that supplies data to the retirement benefits industry. It maintains both a free database for those wondering “how do I find my 401(k)?”, as well as premium databases for a charge.

The Secure Act 2.0 of 2022, a piece of legislation aimed at creating more ways to save for retirement, directed the U.S. Department of Labor to create a searchable 401(k) finder on its website. The tool will be known as the Retirement Savings Lost and Found database and is scheduled to launch by Dec. 29, 2024.

However, the DOL has significantly tightened the scope of its request for information in response to concerns from plan recordkeepers and administrators. Now, the Department of Labor is only seeking information about past participants ages 65 and older who are owed a benefit. Moreover, submitting the information is voluntary for plans. As a result, it’s not clear how many providers will actually submit information, which could limit its usefulness if you’re trying to find your 401(k).

After you track down your old 401(k), your options will depend on where your funds are located.

Learn more: Alternatives to having a financial advisor: How to build wealth without one

You may be able to keep it there — though you should check with your plan administrator about the rules. You’ll also typically have the option of an IRA rollover. If you have a new job with a retirement account, you may be able to roll it over into your current employer’s plan. You can also withdraw your money, though this move can be extremely costly since you may face taxes and penalties, as well as lost growth from not having your money invested.

You can roll over the money into an IRA through the provider of your choice, or you can roll over the balance into a new employer’s plan. Cashing out the balance is also an option, though taxes and penalties may apply.

Learn more: These are the traditional IRA and Roth IRA limits in 2025

If you had a balance of less than $1,000, your plan administrator may have cashed you out and attempted to send you a check. When this occurs, you only have 60 days to redeposit the money into another retirement plan. Otherwise, it’s treated as a distribution, which means you could owe taxes and an early withdrawal penalty if you’re younger than 59½. In this event, the check you receive will be smaller than the amount you had in your 401(k) because your plan administrator is required to withhold 20% for federal taxes.

To avoid losing track of old 401(k)s in the future, consider consolidating accounts when you leave jobs by rolling over the balance into an IRA or a new employer’s 401(k). You may find it easier to keep track of a single account.

If you’re happy with your investment choices and your 401(k) fees are low, you may opt to keep your money in your old job’s 401(k). Be sure to get the name of the plan sponsor and find out the rules for keeping your money invested, particularly if you have less than $7,000 in your account. Also, make sure to provide your current email and mailing address so that the administrator can contact you about any changes to the plan.

Some resources, like the National Registry of Unclaimed Retirement Benefits, allow you to search for old 401(k)s using your Social Security number. However, there’s no single website that all plans are required to use.

You can usually keep your money in your old employer’s plan if you have at least $7,000 in the account. If your balance is less than $7,000, the plan can transfer the funds to a safe harbor IRA they establish on your behalf. Plans are also permitted to cash out former employees with balances under $1,000.

The easiest way to find an old 401(k) is to contact your past employer, which may require a phone call or email. However, you can use free online databases, such as the National Registry of Unclaimed Retirement Benefits database and the Department of Labor’s Abandoned Plan Search, to search for old 401(k)s.

Leave a Reply

Your email address will not be published. Required fields are marked *