A forgotten 401(k) could be shrinking fast — here’s how to track it down and recover it

You may have thousands of dollars quietly eroding inside a retirement account you don’t even realize is still in your name.

More than half of workers are enrolled in a workplace retirement plan, according to Bureau of Labor Statistics data. For many employees, these accounts are an important part of retirement planning and a smart place to invest.

What happens when you leave a job

But once you move on from an employer, what becomes of that retirement money?

If you assume it stays in the same 401(k) you left behind, you could be mistaken. Depending on the balance, the money may be moved into a Safe Harbor IRA instead.

These accounts often lack the advantages of a standard 401(k), which can leave your savings stagnating rather than growing.

Here’s why so many workers lose track of retirement funds without realizing it, and what you can do to safeguard your money.

Small 401(k) balances can end up in Safe Harbor IRAs with weak returns and fees

When you begin a new job with benefits, someone at the company will usually walk you through your options, including any 401(k) or retirement plan available to you.

The same level of guidance often disappears when you leave. According to PensionBee, only 20% of people say their employer explained what would happen to their retirement plan when they exited, and just 10% received written instructions.

That means a former employer may not tell you if your 401(k) has been moved into another kind of account. If your old 401(k) is worth less than $7,000, the company is generally allowed to roll it into an Automatic Rollover IRA, also known as a Safe Harbor IRA.

EBRI estimates that about one-third of 401(k)s are valued below $7,000, which leaves a large number of accounts vulnerable to transfer. PensionBee projects that Safe Harbor IRAs could hold $43 billion by 2030.

The issue is that these accounts often pay very low interest, around 0.5% to 2.0%, which may fall short of inflation. They can also carry monthly flat fees that may eat up any earnings, especially when the balance is small.

“You want this money to grow and be invested in a way that you can take advantage of these returns,” Craig Copeland, director of wealth benefits research at EBRI, told USA Today.

In many cases, that kind of growth is unlikely in a Safe Harbor IRA. PensionBee estimates that a $4,500 balance would reach only $5,507 by retirement in a Safe Harbor IRA, compared with $25,856 in a regular 401(k).

How to find an old retirement account

If you suspect you may have an old 401(k) you never followed up on, it’s worth checking now. Websites such as the National Registry of Unclaimed Retirement Benefits and the Retirement Savings Lost and Found Database can help you search for accounts you may not know you still have.

If you uncover one, you may want to move the money into a current 401(k) or a new retirement account. Even if the balance has not been transferred into a Safe Harbor IRA, combining accounts can make your retirement savings easier to manage and may reduce fees charged by an old plan.

To move an old 401(k) balance into a new or current account, you will need to contact the old custodian and set up a rollover or transfer. A direct rollover or trustee-to-trustee transfer can help you avoid tax consequences; depending on the method, you may need to forward a mailed check to your current custodian.

You may also be charged an account-closing fee during the transfer, which is typically deducted from the balance before the money is sent to your new custodian.