What You Need to Know
- Employees leave behind some 2.8 million 401(k) accounts each year when they change jobs.
- A forgotten 401(k) could cost a person around $700,000 in lifetime retirement savings.
- Stakeholders should make it easier to locate old 401(k)s and roll them over when workers change jobs.
When people leave their jobs, as most Americans do several times in their careers, they sometimes leave their 401(k) accounts behind.
How big a problem is this in terms of the number of accounts forgotten and the amount of money in them?
A new white paper from Capitalize, a platform to transfer retirement assets, concludes that employees leave behind some 2.8 million accounts each year when they change jobs.
The paper estimates that as of May, there were 24.3 million forgotten 401(k) accounts in the U.S., and that the number will rise to nearly 25 million accounts by year-end.
Each account will hold about $55,000 on average, amounting to some $1.4 trillion of assets in total, according to Capitalize.
Over a lifetime, a forgotten 401(k) account could cost a person around $700,000 in forgone retirement savings, the research found. In aggregate, employees could be missing out on $116 billion of additional retirement savings growth each year.
In addition, forgotten 401(k) accounts could burden employers with up to $700 million in fees paid to administer forgotten 401(k) accounts annually, according to the Capitalize data.