Find your Lost 401(k)!
Do you have a long-lost retirement account left with a former employer? Maybe it's been so long that you can't even remember? With over 24 million "forgotten" 401(k) accounts holding roughly $1.35 trillion in assets, even the most organized professional may be surprised to learn of their unclaimed "found" money.1
What are "Forgotten" Retirement Accounts?
Considering that baby boomers alone have worked an average of 12 jobs in their lifetime, it can be all too easy for retirement accounts to get lost in the shuffle.2 Think back to your first job. Can you remember what happened to your work-sponsored retirement plan? If you're even slightly unsure, then it's time to go looking for your potential "forgotten" funds.
Retirement Plan Account Types
Before we get into your search, let's review the types of work-sponsored retirement accounts available. By no means is this an exhaustive list, but the following are the most commonly-found retirement accounts.
- 401(k) - This is a company-sponsored retirement plan that allows employees to contribute a portion of their wages to individual accounts. Some employer plans include automatic enrollment for new employees, so it's possible you may have contributed money without being aware of it.3
- 403(b) - This is a retirement vehicle offered by public schools and certain 501(c)(3) tax-exempt organizations. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary into individual accounts. The deferred salary is generally not subject to federal or state income tax until it's distributed. If you've ever been employed by a public school, college, university, church or non-profit, you may have been offered a chance to participate.4
- Defined Benefit Plan - Sometimes known as traditional pensions, which promise the participant a specified monthly benefit at retirement. Often, the benefit is based on factors such as the participant's salary, age and number of years worked for the employer.5
Once you reach age 72, you must begin taking required minimum distributions from your 401(k), 403(b) or other defined-contribution plans in most circumstances. Withdrawals from defined-contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Starting Your Search
One of the best ways to find lost retirement accounts is to contact your former employers. If you're unsure where to direct your call, the human resources or accounting department should be able to check their plan records to see if you've ever participated. However, you will most likely be asked to provide your full name, Social Security number, and the dates you worked, so be sure to come prepared.
If your former employer is no longer around, look for an old 401k statement. Often these will have the contact information for the plan administrator. If you don't have an old statement, consider reaching out to former coworkers who may have the information you need.
Even if these first steps don't turn up much info, they can help you gather important information.
Websites to Check
Next, it's time to take your search online. Make sure you have as much information as possible at hand and give the following resources a try.
National Registry of Unclaimed Retirement Benefits - This database uses employer and Department of Labor data to determine if you have any unpaid or lost retirement account money. Like most of these online tools, you'll need to provide your Social Security number, but no additional information is required.6
FreeERISA - If your forogtten account was worth more than $1,000 but less than $5,000, it might have been rolled into a default traditional Individual Retirement Account (IRA). Employers create default IRAs when a former employee can't be located or fails to respond when contacted. You can search for 401k and IRA accounts for free using this database, but registration is required.7
Once you reach age 72, you must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
The U.S. Department of Labor - Finally, the department of labor tracks plans that have been abandoned or are in the process of being terminated. Try searching their database to find the Qualified Termination Administrator (QTA) responsible for directing the shutdown of the plan.8
Once you've found your retirement account, what you do with it depends on the type of plan and where it's held. Your location also matters. Depending on where you live, rules and regulations may differ.
You'll have Four Choices:
1. Liquidate it, but you may owe taxes and you may be subject to penalties.
2. Keep it where it is.
3. Roll it to your new employer
4. Roll it into an IRA
If you keep it where it is or roll it to your new employer, you may be paying unnecessary fees. Most plans will have Third Party Administrator (TPA) fees, Record Keeper Fees, Advisor Fees, and Fund Fees. Rolling it into an IRA usually makes the most sense, but that doesn't mean it's the right decision for you.
No matter what you decide to do, be sure to involve your tax and financial professionals since they'll be informed on current regulations for your state. They can also help you identify a strategy for your newfound money: travel, investment, maybe that vacation home you've always wanted. You worked hard for that money, after all, so you should get to enjoy it!
Let us know if you have an old retirement account that you'd like to discuss. We can help!
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CRA Financial, LLC [“CRA]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CRA. Please remember to contact CRA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CRA is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of CRA’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.crafinancial.com. Please Note: IF you are a CRA client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your CRA account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CRA accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if CRA is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (to the extent applicable). Unless expressly indicated to the contrary, CRA did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of CRA by any of its clients. ANY QUESTIONS: CRA’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.