In the aftermath of the Great Resignation, Americans are increasingly job hopping, leading to a significant rise in forgotten 401(k) accounts. As of 2023, approximately 29.2 million 401(k) accounts, totaling around $1.65 trillion, have been left behind—a 20% increase from previous years, according to Capitalize. Nearly half of workers tend to leave their retirement funds in prior employer plans, often without realizing the associated fees.
A 2021 survey by the U.S. Government Accountability Office revealed that 41% of employees are unaware of the fees they incur on their 401(k)s. These can include maintenance charges, and if former employees neglect to manage their old accounts, they could face additional fees that significantly erode their savings over time. For example, a monthly maintenance fee of $4.55 can lead to an estimated loss of nearly $18,000 in retirement funds due to compounding effects.
When switching jobs, employees have options: they can transfer funds into a new employer’s plan or roll them into an Individual Retirement Account (IRA). However, IRAs often come with higher fees and potential long-term losses. Surprisingly, one-third of workers choose to cash out their old 401(k)s, incurring hefty tax penalties.
To assist in locating forgotten accounts, the Department of Labor has introduced a retirement savings lost-and-found database following the Secure 2.0 legislation. Employees can update contact information or use their Social Security number in external databases to find their savings. Additionally, the Portability Services Network has been formed to facilitate automatic transfers of small-balance 401(k)s to new employer plans, minimizing the risk of lost funds. This initiative aims to help workers maintain their retirement savings throughout job transitions.
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