As more Americans quit their jobs, old employer-sponsored retirement accounts can get lost in the shuffle, particularly if they hold only small amounts of money.
One-third of Americans have left a retirement plan behind at a past job, according to research by TIAA. The smaller the account, the more likely it’s overlooked. Every year approximately 1.6 million job-changers leave behind balances below $1,000, according to the Employer Benefit Research Institute (EBRI).
"Preparing for retirement is not just saving, but also doing the follow-up work of maintenance of the funds saved,” said Craig Copeland, an EBRI senior research associate.
As a result, millions of dollars in retirement savings are transferred to states as unclaimed property, only a fragment of which is later claimed by owners who risk losing out on a sizable stockpile for retirement decades down the road thanks to the power of compounding. And now with the Great Resignation movement, this could balloon in the next few years.
"My recent study with researchers at the U.S. Treasury and Federal Reserve Bank of Chicago shows that many abandoned retirement accounts never even make it to state unclaimed property, instead staying with the former employer and making them harder to find," said Anita Mukherjee, an assistant professor of Risk and Insurance at the Wisconsin School of Business, University of Wisconsin—Madison.
"We found that nearly 3% of Americans have at least one retirement account that has been abandoned at age 73, and that the median account holds nearly $6,000 — with nearly a quarter of abandoned accounts being above $25,000 in value."
It’s not simply forgetfulness.
Employers change names, which can make hunting an old account tricky. Or workers don’t update their current addresses with a former employer’s plan administrator, so the trail goes cold to send regular account notices and updates.
Lawmakers have frequently introduced legislation to help workers track accounts via a national clearinghouse, but so far without success.
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Private businesses have also jumped in to solve the problem. Retirement Clearinghouse, a fintech services firm based in Charlotte, N.C., for example, provides a service that automatically moves a departing employee’s 401(k) savings funds from the previous employer’s plan to their new employer’s plan, even if their assets are less than $5,000.
The strategy has caught the eye of some big players in the retirement field, too. To help reduce cash-outs of small-balance 401(k)s or abandoned savings, Vanguard, the mega mutual fund firm, plans to launch the Retirement Clearinghouse’s auto portability program for 401(k) sponsor clients and their participants in mid-2022.
How to find unclaimed retirement accounts
About 25 million people who changed jobs between 2004 and 2013 didn’t take their retirement account along with them, according to a Government Accountability Office (GAO) report. Seventeen states reported in a GAO survey that $35 million in unclaimed retirement savings was transferred to them from employer plans and individual retirement accounts (IRAs) in 2016.
What if you’re one of those 25 million people who owns some of those millions? You can still reclaim it.
The National Registry of Unclaimed Retirements Benefits is a free online searchable resource. A former employer or financial institution will have had to register the one-time employee on the site as having an unclaimed retirement account. The site is operated by PenChecks Trust, an independent retirement plan benefit distribution processing service provider, and it does require entering personal information, including your Social Security number.
Other websites offering free help finding missing retirement accounts include the Department of Labor, which provides a form to seek direct assistance from a benefits advisor, if, for example, a former employer has gone out of business, filed bankruptcy, or been acquired by another company or merged with one.
If you know the name of your employer and the plan, you can also tap into DOL’s “Abandoned Plan Search” feature to find plans that have been closed or are in the process of shutting down.
The Pension Benefit Guaranty Corporation offers a database of searchable unclaimed pensions. It also allows former employees to track defined contribution plans such as 401(k) accounts. The Pension Rights Center, a nonprofit organization, can also help find a missing retirement plan via its PensionHelp America service.
A final option: Search your state’s unclaimed property database. If your plan lost track of you, it may have forwarded your benefits to your state’s unclaimed property division.
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon