What happens to money left in an old 401(k)?
A big part of personal finance, and financial wellness more directly, is keeping track of all your accounts. If you’ve ever had a 401(k) account with an employer and lost track of it after you’ve left, you’re definitely not alone.
We estimate that there are over 25 million ‘orphaned’ 401(k) accounts (sometimes called “employer-sponsored plans”) just like yours. These are accounts tied to former employers that continue to have money in them but are not actively being monitored or used.
At Capitalize, we help people find these old, orphaned 401(k) accounts and consolidate them into a new retirement account — for free. This helps them better keep track of their retirement savings over time.
The retirement funds you’ve put away in your 401(k) savings account (or another similar qualified retirement plan) remain yours even after you’ve left that job. Most of the time it’s still at the same financial institution that managed it while you had it.
This financial institution is known as a “401(k) provider”. It’s a company engaged by your former employer to hold and manage your 401(k) assets. You can see a full list of 401(k) providers here.
Some of the time, though, your money has been transferred to a new institution — this can impact all former employees of a particular organization. That generally happens in one of three cases:
- Your former employer changes their 401(k) provider — when this happens your 401(k) account will be transferred over to the new institution.
- Your former employer is acquired by another company — when this happens your account usually gets transferred to the 401(k) provider used by the acquiring company.
- Your old plan account balance was under $5,000 and was transferred to an IRA at a different institution — this is known as a “forced rollover” and is allowed by some 401(k) plans.