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There is something important that I would like you to do if you changed jobs during your career. Please check if you “took” your 401 (k) with you or left it on purpose – or forgot it, leaving it lost, abandoned and maybe abandoned?
Bearing in mind that polls tell us that 401 (k) is one of the most valuable perks for people looking for a new job, how can you forget about a 401 (k)? According to a survey by Charles Schwab of 401 (k) plan members (tinyurl.com/4dfajk6p), a 401 (k) account ranks among health benefits as a “must have” option when looking for a new job. In fact, a 401 (k) plan (86%) and health insurance (84%) finished far ahead of life insurance, disability insurance and a health savings account in the survey.
Considering all the good things about a 401 (k), how much of a problem is a lost 401 (k)? Studies show that this is not uncommon.
Capitalize, a company that helps people roll over their 401 (k), found approximately 24.3 million “forgotten” 401 (k) accounts in the United States in May 2021 with approximately $ 1.35 trillion in assets. (tinyurl.com/ynhn76js).
I must say that these numbers took me by surprise. How could we forget so many accounts and so much money?
When you step back to see the big picture, that might be the answer: the number of times people change jobs.
The Bureau of Labor Statistics, in a longitudinal survey released in August (tinyurl.com/n29aff74), found that âpeople born in the last years of the baby boom (1957-1964) held an average of 12.4 jobs aged 18 to 54. About half of those jobs were held between the ages of 18 and 24, according to the report. Again, these numbers are hard to believe, but they put the possibility of 401 (k) forgotten in context.
The issue of 401 (k) s (and other pension plans) left behind is important enough for the House of Representatives to project HR 2954, “Securing a Strong Retirement Act of 2021” (tinyurl.com/6hv88dj4), sets up a âlost and found retirement savingsâ (article 306). Lost and Found would enable people to track down their lost 401 (k) through an online searchable database. The bill also creates a Lost and Found Retirement Savings Office. The Senate has similar provisions in a bill entitled “Retirement Savings and Security Act 2021” (tinyurl.com/3wytad4f).
In the meantime, a free search tool is available through the National Association of Trustees of Unclaimed Property, a network of the National Association of State Treasurers, on unclaimed.org. Another free site is the National Register of Unclaimed Retirement Benefits (tinyurl.com/3xn9vc6z). You can also find paid search tools by searching for “lost 401 (k)”.
There is another side to this conundrum. Companies that sponsor 401 (k) plans are forced to find the missing 401 (k) participants. Earlier this year, the Ministry of Labor published best practices for avoiding losing track of participants, including red flags such as return mail or uncashed checks (see tinyurl.com/kakzdb).
You would think the IRS could help locate missing plan members, but no longer after 2012 (tinyurl.com/3pzt7yrr).
One final thought: Remember that an employer can shut down their business and terminate a 401 (k). However, since the 401 (k) is not owned by the company, your 401 (k) survives (tinyurl.com/2y5z8yz8). (Just make sure you get reports.)
Let me leave you with this thought, which I would love to share with everyone you know: When you change jobs, don’t forget your 401 (k). You can bring it with you to your new employer (if the new plan allows it), you can transfer it to an IRA, or you can keep it with your old employer. If you do the latter, be sure to keep in touch with the 401 (k) s alumni archivists. You need to keep them informed of every move you make. Make sure you continue to receive statements – check quarterly.
Finally, let me remind you that 401 (k) participants who understand their 401 (k) can prove it to themselves and others through an essay contest that I sponsor. Submit your essay on 401kchampion.com before October 28 and compete for the 401 (k) title.
Julie Jason, JD, LLM, Personal Fund Manager (Jackson, Grant of Stamford) and Author, welcomes your questions / comments ([email protected]). Its awards include the 2020 Clarion Award, symbolizing excellence in clear and concise communications. Her latest book, an organized collection of Columns from Julie, is âRetire Securely: Insights on Money Management From an Award-Winning Financial Chronicistâ. To hear Julie speak, visit juliejason.com/events.
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