Most people will have several different jobs throughout their careers, and switching jobs is even more common in a volatile economy. More than half of Americans said they were somewhat or very likely to look for a new job in the next year as they are prioritizing flexibility, remote work and higher pay, according to a recent Bankrate survey.
When you have changed jobs during your career, it’s possible that you left behind a 401(k) plan when shifting between employers. You’re not alone — Americans forget approximately 24.3 million 401(k) plans with approximately $1.35 trillion in assets, according to a report by Capitalize. It’s quite costly for those who forget. Leaving behind a 401(k) account can cost an individual, in some cases, hundreds of thousands of dollars in foregone retirement savings over a lifetime due to potentially keeping a higher-fee plan and having poorly allocated investments. But don’t worry, it’s not too late to retrieve what’s yours.
Before you get started, it’s a good idea to confirm that you contributed to a 401(k). If you are unsure, you can check previous years’ tax returns and old W-2s. Any contributions will be in Box 12 of a W-2.
How to Find a Lost 401(k) Plan
Start by locating any previous plan statements you may have, as it will provide your account number and the plan administrator’s contact information. These could have been physically mailed to you or filed away in your email. If you don’t have any previous plan statements, the next step is to contact former employers requesting information about your retirement accounts. By providing your personal information, such as your name, social security number and employment dates, the Human Resources department should be able to determine your participation in their 401(k) plan.
If that doesn’t give you the information you need, there are databases you can search online to determine whether benefits that rightly belong to you have been transferred to the unclaimed property accounts of the state(s) where you lived or worked.
- The National Registry of Unclaimed Retirement Benefits is a secure search website designed to help both employers and former employees. Employees can perform a free database search to determine if they may be entitled to any unpaid retirement account money. Employers can also register the names of former employees who left money with them.
- If your lost account was worth between $1,000 and $5,000, your former employer might have rolled the funds into a default participant IRA account on your behalf. Default IRAs can be created when a participant fails to respond to a former employer’s request for pay-out instructions. For free, you can search FreeERISA regarding 401(k) and IRA accounts.
- The Department of Labor lets you file, find and learn about Form 5500 Series, an annual report required to be filed for employee benefit plans, which may be helpful for determining plan information.
- The U.S. Pension Guaranty Corporation maintains a database of missing participants in underfunded pension plans that the agency has taken over, as well as a database of participants whose employers have terminated their pension plans.
What to Do Next
Once you’ve located your previous plans, work with your financial advisor to roll the funds over to a specified 401(k) or IRA account, preferably somewhere you already have an account. Your advisor should also contact the previous 401(k) provider to ensure the money is sent to the receiving financial institution and doesn’t land in your account first. According to an article by AARP, this incorrect action could result in a mandatory 20% tax withholding on the funds distributed.
The next key step is to consolidate all of your retirement accounts. It can be difficult to create a cohesive investment strategy when funds are held at multiple locations. By having all of your funds consolidated into one account, you can more easily keep track of your balance and account performance. Your previous 401(k) plan also may not be geared toward your current financial goals, so this is a great time to devise a better-suited plan that meets your needs.
Overall, finding lost or forgotten 401(k) accounts may seem daunting, but it’s important to maximize your retirement savings. Every penny counts, so you don’t want to let hundreds or thousands of dollars go unclaimed. Your financial advisor can help guide you through the process or provide more resources if you hit a dead end.
Check out our retirement planning playlist for more tips on getting the most from your benefits.
Frequently Asked Questions
- What if my employer went out of business? Under federal law, your employer must keep your 401(k) funds separate from their business assets, meaning your money is protected. It can’t be used to pay off your company’s loans, to cover payroll or for any other purpose.
- How do I roll my 401(k) to my new employer? If your new employer allows for a rollover, you can choose a direct or indirect option. A direct rollover is usually the best option. You file a form letting your old plan administrator know where to send the funds, and they take care of it for you. An indirect rollover is when your old 401(k) plan administrator writes you a check for the funds in your account and you deposit that into your new account. It’s important to do this within 60 days of cashing out your old account because if you wait longer, the government will consider it a distribution and will tax you on the money.
- What can I do with an old 401(k) once found?
- Cash it out: This is also known as a withdrawal. It allows you to get a check with the money you saved in your account, but you’ll pay taxes and penalties on it if you’re under the age of 59 1/2.
- Leave it in the old account: Some plans allow you to leave the funds in the account even after you’ve left a job. It can be a viable option if you like the investment options and are comfortable with the fees in that account. However, you will want to keep track of it in case your previous employer changes providers.
- Roll it over into an IRA: A rollover is a tax-free transfer of your savings from one retirement account to another. It is an open account that is not tied to your employer.
- Roll over your old account into a new account: While most choose to move their old 401(k) into an IRA, you can also move it into a new account you have with a current employer if they allow it.
Consult a Fortune Financial Advisor
In addition to helping you locate your lost funds, we can help you find another potential windfall. If stock contributions make up any part of a past or current 401(k) plan, there are potential tax savings (i.e., extra retirement income that is too often hidden just because we haven’t been told where to look). Depending on your plan tenure, the tax impact on your retirement funds could be pleasantly significant.
When developing a retirement plan strategy, we provide a transformational assessment process that balances the financial responsibilities of daily living and those needed to fulfill your dreams. And, it will change your approach to meeting your financial goals. We start with thoroughly getting to know which priorities are critical to you. It may be retirement concerns, how to fund college costs for your children or simply getting a workable plan to reduce or eliminate debt. Our industry-leading software will then identify your unique risk tolerance by analyzing your actual financial resources rather than generalized information.
Contact a Fortune Financial advisor to learn more about how we can assist you in finding old, lost or unclaimed benefits. Our team of experts is equipped to help you every step of the way. Email us at fortuneinfo@fortuneadv.com or scan the QR code below. Follow our YouTube channel and other social media accounts for more financial planning tips.
Important Note
This material is provided for educational purposes only and does not constitute investment advice. The information contained herein is based on current tax laws, which may change in the future. Fortune Financial Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. The information provided in these materials does not constitute any legal, tax or accounting advice. Please consult with a qualified professional for this type of advice. The information provided above is obtained from publicly available sources and is reliable. However, no representation or warranty is made as to its accuracy or completeness.
