Given the number of times the average American changes jobs over the course of their working life, it probably is not surprising to learn that along the way 401k’s tend to get “lost”. The mobility of the American workforce exacerbates this situation. As Americans move around the country in order to advance their careers or take advantage of new opportunities, they do not always remember to update their address with the custodians of all their 401k’s. It is easy to remember to update your address for the retirement plan account you have with your current employer but not so easy to remember to do so on accounts held with prior employers — especially given that you may only be sporadically receiving account statements if the accounts are small and relatively inactive.
It is easy to see how this situation unfolds. For example, let’s assume you live and work in Philadelphia and have a 401k with your current employer along with two smallish 401k’s with two prior employers. You may have online access to your current 401k but not for the two other 401k’s. Also, you may only receive quarterly account statements for these two other 401k’s. You get a promotion at work and this necessitates a move to Dallas. Your employer obviously knows you have moved and the address on your current 401k is updated. You remember to update your new address on most of your other accounts — bank accounts, credit cards, etc. — but you forget about your two small 401k’s as you seem to hardly ever get statements from them and it simply slips your mind. You may even set up an address forwarding request with the post office for a few months but this eventually expires. The custodians for your two other 401k’s will continue to send statements and other communications to you at your Philadelphia address until those statements are returned as undeliverable when your forwarding order terminates.
At some point, the custodians of your two 401k’s will determine that you are “lost.” Your accounts will basically sit unattended and may even be converted to cash rather than stay invested. Over time, fees may erode the value of these accounts and you will miss out on any growth opportunities that may have existed if your assets were invested in something other than cash. Please note that the companies holding your 401k’s have no obligation to search for or find you in order to return your money to you. Also, at present, there is no searchable database where you can look for any missing retirement plan assets (although there is a searchable pension database through the U.S. Pension Benefit Guaranty Corp.). The longer your retirement assets stay detached from you, the chances that you will receive them back intact falls as well. At some point, your state may even try to claim that your two 401k accounts have been abandoned and thus the money in them should be turned over to the state.
One way to prevent this type of situation from arising is to consolidate your 401k assets. This way, you will not have to keep track of a jumble of small 401k’s spread across numerous investment firms and custodians. You may be able to reduce the fees and other expenses by consolidating these accounts.
If you want to simplify your financial life and reduce the chance that you will inadvertently misplace retirement assets, please call us to discuss the best way to proceed in terms of alternatives to keeping multiple 401k accounts. If you think you may have some lost 401k assets, please call us as we may be able to help you locate them.