29 Million People Have Forgotten About Their 401(k)s. Here’s How to Avoid Joining Their Ranks

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Some 401(k)s have fallen by the wayside. Read on to see how you can avoid that trap. 

Carving out money for a 401(k) is not always an easy thing to do. After all, when you have loads of immediate bills to cover, finding spare cash for your retirement savings can be tough.

That’s why if you’re going to contribute to a 401(k) plan, you’ll want to make sure not to forget about that money. But if you leave an old 401(k) where it is upon switching jobs, you run that very risk.

There are tons of forgotten 401(k) plans out there

You may be reading this and thinking, “How could anyone just forget they have money in a 401(k)?” But data from Capitalize reveals that there are an estimated 29.2 million forgotten 401(k) accounts just sitting around waiting for their owners to claim them. All told, that amounts to an astounding $1.65 trillion in retirement plan assets.

What’s more, Capitalize says the number of forgotten 401(k) plans increased by over 20% since May 2021. And that’s due largely to the Great Resignation.

Over the past two years, many workers have left their jobs in search of better opportunities. For some, it was a matter of wanting more flexibility. For others, the goal was to find more fulfilling work. Either way, there’s been a lot of job-changing over the past couple of years, and that’s led to an uptick in 401(k)s that have been left behind.

How to make sure your 401(k) isn’t forgotten

A big reason so many people forget about their 401(k)s is that those accounts only contain small amounts of money and they opt to leave their 401(k)s alone upon switching jobs. It’s pretty unlikely that someone with a $400,000 balance in their 401(k) is going to change jobs and simply forget about a nest egg that large.

Rather, what’s more likely to happen is that someone with $500 or $600 in their 401(k) might switch jobs, figure they’ll move their money over at some point, and then forget about it. Since it’s not such an enormously large sum, it’s easy to see how it might end up falling by the wayside.

But the reality is that no matter how large or small your 401(k) plan balance is, it’s best to make sure you’re keeping tabs on that money and aren’t forgetting it. Any time you leave a job that sponsored a 401(k) for you, it’s best to roll that money into a new retirement account right away.

In this regard, you have options. If your new job offers its own 401(k) plan, you can send the money into that new employer plan. If not, you can roll an old 401(k) into an IRA.

Now, one thing you don’t want to do is roll a 401(k) into a regular brokerage account. Doing so could trigger taxes and a penalty. Rather, your aim should be to roll an old 401(k) into another retirement plan.

Any time you save money, whether it’s for retirement or emergencies, it means you’ve sacrificed something. So don’t let your hard work go to waste. Keep tabs on any 401(k) plan you have, and if you leave the company sponsoring it, roll that money into a different retirement plan right away so you don’t risk forgetting about it.

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