What if you had money stashed away but forgot about it, and now it’s parked somewhere, waiting for you?
For many workers, this scenario is a reality.
There is a growing number of forgotten 401(k) accounts with money waiting to be claimed. This situation occurs because a 401(k) account doesn’t automatically follow you from job to job, and many workers move on without rolling over the previous account.
Here’s a guide to finding and claiming retirement money you may have forgotten.
[READ: Retirement Accounts You Should Consider.]
What Are Unclaimed Retirement Benefits?
Unclaimed retirement benefits refer to funds from old 401(k) accounts or other retirement plans that remain unclaimed by their owners, according to Cliff Ambrose, founder and financial advisor at Apex Wealth in Danvers, Massachusetts.
“This often happens when people change jobs and forget to transfer their old accounts or lose track of their plan details over time,” Ambrose said.
Sometimes people have good intentions when planning to roll over old accounts, believing they will do it eventually. But life gets busy and “eventually” never arrives.
[Read: 401(k) Mistakes Job Hoppers Make.]
How Common Is It to Lose Track of an Old 401(k)?
When a worker changes jobs, there are often many small details to address. Changes to a 401(k) plan may simply be forgotten.
According to a 2023 study by Capitalize, which facilitates rollovers of 401(k) retirement accounts, the number of forgotten 401(k)s is almost at 30 million, an increase of 20% from the previous two years. Capitalize estimated the value of abandoned accounts to be at $1.65 trillion.
An account owner has a few options for handling 401(k) funds. Those include:
— Rolling over the money into an IRA.
— Rolling over the money into a 401(k) account at the new employer. However, not all plans allow this.
— Withdrawing the assets. This could be a costly option. Savers under age 59 1/2 will face penalties and taxes on withdrawals from traditional 401(k)s.
— Leaving the money in the former employer’s plan. This is the choice that most often results in a forgotten account.
[READ: What’s the Difference Between a Pension Plan and a 401(k)?]
Steps to Finding Old Retirement Accounts
— Contact your former employer. The human resources department of your former employer may have information about your account. If you contact the company, that’s the place to start, not with your former manager or a co-worker.
The human resources department can determine whether you have an account and give you information about reaching the brokerage where the funds are held.
— Contact the plan provider directly. “If the company utilizes a retirement provider like Fidelity or Vanguard, you do not have to contact your ex-employer,” said Richard Craft, CEO of Wealth Advisory Group in Berwyn, Pennsylvania, in an email.
In some cases, 401(k) investors receive statements from the provider but haven’t taken steps to roll the account over.
“You can also call the plan’s 1-800 service number, which I recommend if you want help rolling over your money,” Craft said.
“One problem may be that a company changes their provider and you somehow are not aware. Now you have a dead end,” he added. “Then you may have to call the employer to see if a change has been made and to whom.”
— Look through old documents. If you have old pay stubs, they may not be of much value when tracking down an old account. “There is no helpful information on a pay stub. It will only be generic, showing a 401(k) contribution or deduction,” he said. Instead, search for old statements from your former 401(k) provider.
— Search online databases. Companies such as Capitalize can help savers locate and roll over forgotten accounts.
There are also other online sources for information. “One can search the National Registry of Unclaimed Retirement Benefits database using your Social Security number to find any unclaimed retirement benefits,” said Joshua Mersberger, regional director at Merit Financial Advisors in Kalispell, Montana.
States have unclaimed property websites. In addition, the Department of Labor has a database where users can do a Form 5500 search for employers that offer 401(k)s. However, the DOL site can be cumbersome to navigate.
Can a Financial Advisor Help?
If you’re in the process of rolling over accounts from previous employers, a financial advisor can help you avoid mistakes and tax penalties.
“A financial advisor can play a crucial role in this process by offering expertise in managing and consolidating your retirement assets,” Ambrose said. “They can assist in contacting former employers, navigating online databases and ensuring that all your retirement funds are properly accounted for and optimally managed.”
Craft also noted that a good advisor will know how to help locate old plans and roll them over or consolidate them. For example, a retirement saver with three old 401(k)s can consolidate them into one IRA.
“I think it is best to put old funds into a personal IRA,” Craft said. “That way, workers will always have access to this account and can control everything.”
He recommends asking the advisor how accustomed they are to working with company retirement plans, as some advisors only handle personal accounts.
More from U.S. News
What Is the Maximum Possible Social Security Benefit in 2024?
10 Reasons to Save for Retirement in a Roth IRA
How to Correct Your Social Security Earnings Record
What Are Unclaimed Retirement Benefits and How Do I Find Them? originally appeared on usnews.com
Update 09/10/24: This story was published at an earlier date and has been updated with new information.
