Check These Databases for Retirement Savings You Forgot About
For large retirement savings, the silver lining of record inflation is a record ceiling increase for your 401(k) in 2023 . But if you leave the company – on your own terms or not – what happens to your employer-sponsored retirement account? While you have several options for handling the old 401(k) error, some strategies are better than others. Here’s what you need to know about dealing with a 401(k) form from previous employers and why it’s important to deal with it as soon as possible.
Don’t let your old 401(k) get lost
Generally speaking, you have three options for a 401(k) at a company where you no longer work: cash it out, keep it where it is, or include it in a new plan or account.
Firstly, experts usually do not advise cashing out. With a few exceptions, you’ll face distribution taxes, not to mention a 10% fine if you’re under 59.5.
For the “leave it where it is” option, you might be tempted to simply leave your retirement savings in your former employer’s plan. I understand that the hassle of organizing your accounts may not seem like a top priority, especially if you’ve just been fired. However, there are some obvious drawbacks here, namely, you can no longer contribute to this plan. Also, the longer you wait, the harder it can be to track down old 401(k) accounts. (Again, thanks to the provisions of SECURE 2.0 , finding old accounts should be easier than ever.)
Another risk associated with leaving your account where it is is what plan administrators, also known as the financial firm that owns the account, can do with your abandoned funds. According to NerdWallet , if you had over $5,000 in your retirement account when you left, there’s a good chance your money is still there as it is. But if you left between $1,000 and $5,000, the plan administrator can transfer the funds to a special IRA without your consent. (Although SECURE 2.0 changed that limit to $7,000 starting in 2023.) And for anything under $1,000, they can just write a check for the total amount, mail it to your registered address, and let you deal with the tax bill and fine for early withdrawal.
The wisest way forward is usually to merge your old 401(k) into another qualified retirement plan. The obvious benefit is the maximization of your savings, access to a wider range of investments, and the ease of keeping track of fewer funds. However, if you’ve already let the old 401(k) (or more) get lost in the shuffling, you’re not alone. Here’s how to track down an old 401(k).
How to track down an old 401(k)
If you are looking for 401(k), there are several places you should start your search. Your first step should be to contact your old employer . Start with Human Resources or find an old 401(k) statement to contact your plan administrator.
If your former employer or plan administrator can’t tell you where your money is, then your next step is to try to trace your 401(k) form to your social security number . Connect your SSN to any of these databases to try and find your old account:
- National Registry of Unclaimed Retirement Benefits
- Department of Labor Abandoned Plans Database
- US Pension Guaranty Corp. database of unclaimed pensions.
- FreeErisa
Once you have found your money, it should be fairly easy to transfer your investment to an account of your choice. In any case, it’s worth talking to a financial advisor before moving your old 401(k) to make sure you understand any scheduling implications that may arise.