| Changing jobs? Don't forget about your 401(k) plan | | |  | WED, APR 20, 2022 | | | | Believe it or not, one of the biggest mistakes many people make is to leave an old 401(k) plan behind at a previous employer when switching jobs or retiring.
Of course, a job change can be a very exciting event. It's a way to take everything you learned in your previous role and grow your career. So, why do so many people mess things up by forgetting about that 401(k) plan?
I can't believe I need to say this: It's your money that you earned which will get you through your retirement years, so how can you just forget it's there?
Well, there's apparently a great deal of forgetful people who took their eyes off the prize.
To that point, Americans will have nearly $1.35 trillion left behind in retirement accounts that are connected to previous employers, according to a 2021 study "The true cost of forgotten 401(k) accounts" by Capitalize. Almost 20% of all the money American workers have in retirement accounts is tied up in old plans. The estimated average size of those old accounts is $55,000.
That study estimated that there are 24.3 million "forgotten" 401(k) plans holding those $1.35 trillion in assets. What's more, an additional 2.8 million accounts are left-behind by job changers each year, though some will eventually be reclaimed or liquidated.
The study also concluded that leaving behind a forgotten 401(k) account has the potential to cost an individual about $700,000 in foregone retirement savings over a lifetime.
Of course, you do have several options for how to handle the retirement savings that is accumulated at a former employer, depending on your situation. CNBC's Sarah O'Brien spoke with financial experts and they offer some valuable tips for evaluating how to handle the 401(k) plan from your old job.
The key is to be proactive and create a plan at the time you switch jobs. On the flip side, of course, finding an old 401(k) account left behind from an previous job can be tricky if you lose track of it.
"It's really common. People switch to a new job, they have life changes going on, they forget about it and then 10 years later they aren't even sure who [the 401(k)] was with or who the provider was," explained one financial advisor.
For all those forgetful folks out there, here's some good news: There is actually pending legislation in Congress that would create a "lost and found" database to make locating lost accounts easier.
While the "lost and found" is a cool idea, here's my 2 cents: Just don't forget about that 401(k) plan!
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