US taxpayers are sitting on $1.35 trillion in forgotten 401(k)s. That’s right–not million, not billion, but trillion. A shockingly high number, yet with over 24 million forgotten 401(k) accounts, one can begin to understand the scope. For many, switching careers is the culprit. The average employee stays with a company for around four years before looking for a new job, meaning a new 22-year-old college grad might have seven different jobs by the time they turn 50.
So what happens to your 401(k) when you change jobs? Nothing. Your 401(k), including payroll deductions, employer contributions, and any market growth, remains in place, barring an elective rollover to a new employer plan or another account. With so many forgotten 401(k)s, the industry has an official (albeit pretty sad) name for such accounts: the Orphan 401(k)s.
Luckily you can still find any Orphan 401(k)s from previous positions and transfer your funds so that you can continue to invest in a tax-advantaged account—hopefully with a little more extra cash than you had thought.
How to find old 401(k) accounts
Before you start looking for your orphan 401(k)s, make sure you have them. The easiest way to determine if you have a forgotten 401(k) is by looking at your previous tax returns. In Box 12 on your W-2 form, you should see whether or not you’ve made 401(k) contributions in previous years. If you have, you likely own a 401(k).
There are four ways you can find your missing 401(k)s from previous employers:
1. Contact your old employer and colleagues
The easiest way to find your orphan accounts is by contacting the human resources department at your old employers and asking if they are still holding your account. They can also find your 401(k) with your social security number.
2. Get in touch with your plan administrator
If an old employer doesn’t have your files or no longer exists, you’ll have to look for your plan administrator. If you know who your plan administrator is, call them directly.
If you don’t, you’ll need to get a copy of your Form 5500. Plan administrators are required to file your Form 5500 every year– if you can find one, you’ll have found your plan administrator’s contact information. Some free databases you can use to find your Form 5500 include:
3. Check out online databases
If your past employers reported you as a missing participant, then you can check some online databases that contain records of your old employers or forgotten 401(k)s, including:
If you can’t find your plan within the databases, call the Employee Benefit Security Administrations (EBSA) at 1-866-444-3272.
4. Look for an IRA
If you had less than $5,000 in your account, it’s possible your balance was transferred into an individual retirement account (IRA). Look for your IRA through the Abandoned Plan Database and get your Termination Administrator’s contact information.
What you can do with your orphan 401(k)s
As soon as you’ve found your Orphan 401(k)s, you need to decide what to do with your funds. If you’re younger than 59 1/2 years old, withdrawing your funds may mean you have to pay a 10% penalty fee, so it could be financially advantageous to roll or transfer your funds into another tax-advantaged account.
Depending on your former employer’s current state and how much control you want over your investments, you could:
- Keep the old 401(k). If your former employer is still around and your plan is meeting your financial needs, you can keep your 401(k) as is. However, you can’t make any additional contributions.
- Transfer your old 401(k) to your current employer’s 401(k). If your plan with your new employer has better perks, consider transferring your old account to your new one.
- Roll over your old 401(k) to a Solo 401(k). A Solo 401(k) is a retirement account for self-employed individuals who don’t have employees and want to shoulder their own contributions. It also has more flexible investment options for those who want to manage their investments.
- Roll over your old 401(k) to an IRA. An IRA gives you more control over where your money is invested, especially a self-directed IRA. It’s the perfect option for those who want an abundance of investment options in alternative assets, like local and foreign real estate, farmland, and precious metals, among others.
If you have any questions on how to transfer or roll over funds from a previous or orphan 401(k), we would be happy to help! Please contact us at 877-742-1270 or firstname.lastname@example.org.
Ready to get started? Open a self-directed account today to start investing in your future!