A new study has revealed that a record number of Americans quit their jobs last year, resulting in inactive 401(k) accounts with average balances of $55,400 left behind. According to estimates by financial services company Capitalize, approximately 1 in 5 U.S. workers have left behind or forgotten about their 401(k) retirement accounts, which represents a nearly 60% increase compared to the previous year.
When individuals quit their jobs, they have four options for their 401(k): leaving it with the old employer, cashing it out, rolling it over into an individual retirement account (IRA), or merging it with their new company’s 401(k) plan. Surprisingly, many workers opt to do nothing and keep their accounts active with their old employer, but this can lead to inactive accounts that are easily lost or forgotten over time.
One consequence of inactive 401(k) accounts is the payment of unnecessary administrative fees and penalties for having a dormant account. These fees can eat away at retirement savings and severely impact an individual’s financial future. Therefore, financial experts recommend consolidating old 401(k) accounts into a single, active retirement account, such as an IRA or new 401(k), to make it easier to manage and maintain the portfolio while avoiding duplicate administrative fees.
Consolidation not only helps individuals keep track of their retirement savings, but it also allows them to take advantage of better investment options available in their new 401(k) plan. With a wider range of investment choices, individuals can potentially increase their returns and grow their retirement funds more effectively.
However, before consolidation can occur, individuals need to track down all of their 401(k) accounts, including any they may have forgotten about. This can be a challenging task, as people may have changed jobs numerous times throughout their career and lost track of their various retirement accounts. To simplify this process, individuals can seek assistance from financial advisors or use online tools that help locate and consolidate retirement accounts.
In conclusion, the surge in Americans quitting their jobs last year has resulted in numerous inactive 401(k) accounts being left behind. To avoid unnecessary fees and maximize their retirement savings, individuals are urged to consolidate their old accounts into a single, active retirement account. By doing so, they can better manage their portfolios, benefit from improved investment options, and maintain a clear overview of their financial future.
“Infuriatingly humble tv expert. Friendly student. Travel fanatic. Bacon fan. Unable to type with boxing gloves on.”