Forgot About an Old 401(k) Account? Here’s What to Do

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You don’t want to give up money that’s yours. 

Many of us struggle to save money for retirement. After all, it’s hard to make those IRA or 401(k) contributions when we’re busy tackling other expenses, like mortgage payments, car loans, and utility bills. That’s why when you do manage to save for retirement, you shouldn’t be willing to give that money up.

Unfortunately, though, a lot of people fall into that very trap when they save in an employer-sponsored 401(k) plan and then leave their jobs or get let go. In fact, Vivian Tu of Your Rich BFF says she once left $30,000 in an old 401(k), which was a huge mistake. And it’s a mistake you don’t want to repeat.

Don’t neglect your money

Tu explains that lots of people leave their 401(k)s at their old jobs after they quit or get laid off. But in doing so, they often end up paying high fees for no good reason.

In fact, Tu says that not rolling over a 401(k) has the potential to cost almost $700,000 in forgone retirement savings over a lifetime. That’s a heck of a lot of money to give up.

If you’ve realized that you’ve forgotten about an old 401(k), don’t panic. But also, dig up an old statement or log into your account so you can start the process of rolling that money into an IRA account. You can also roll an old 401(k) into a new 401(k) if you’re working for a company that has its own plan.

Either way, though, your best bet for moving your money over is to do a direct rollover. This basically has your money transferring from one retirement account to another without you getting a check.

If you do an indirect rollover, where you get a check for your old 401(k) and it’s on you to deposit those funds into a new retirement account, you only get 60 days to put that money where it needs to go. If you don’t stick to that time frame, the check you receive with your old 401(k) funds might be treated as a distribution, which could leave you subject to penalties and taxes.

A great way to find missing money

You may not realize how many old 401(k)s you’ve abandoned during your career. If you’ve switched jobs a lot, it may be that you have $3,500 lingering in one 401(k), $3,000 in another, and $2,000 in a third.

That’s why Tu recommends using a service called Capitalize. It helps people find old 401(k)s at no cost.

Capitalize estimates that there are more than 25 million unclaimed 401(k) plans just sitting waiting to be reclaimed. So if you’re not sure whether you have funds for retirement floating around out there, it could pay to check it out.

Funding a 401(k) takes a lot of effort, so you don’t want yours to go to waste. If you know you have a 401(k) from an old job, don’t just leave your money sitting there. Instead, roll it over. And if you’re gearing up to leave a job, make a plan for your 401(k) so you don’t end up forgetting about the money you’ve worked so hard to save.

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