September 8, the Friday after Labor Day, marks National 401(k) day. It’s the day Americans are encouraged to check in on their retirement readiness. 401(k)s and similar workplace retirement plans are common, popular vehicles to save for retirement.
What’s so great about 401(k)s, anyway?
Contributing to a pre-tax traditional 401(k) reduces your taxable income, while a Roth 401(k) allows you to contribute after-tax money but enjoy tax-free growth and tax-free withdrawals. You can contribute up to $22,500 to a 401(k) in 2023 as an individual, and an additional $7,500 as a catch-up contribution if you’re 50 or older. For IRAs, you can contribute up to $6,500 per year ($7,500 if you’re 50 or older).
Another key advantage of the 401(k) is the employer match, if it’s offered. If you put a certain percentage of your paycheck into a 401(k), let’s say 3%, some companies will match that percentage.
But what if you left an employer and still had a 401(k) balance? If you’re not sure where one of your 401(k) accounts is, now is good a time to find it. According to Capitalize, a company that helps consumers find and transfer retirement accounts, there were 29.2 million lost 401(k) accounts in May 2023, worth about $1.65 trillion. Even if you’ve left a small balance behind, it could be valuable when you retire.
A forgotten account?
If you think you have a 401(k) from a previous job, finding it could take some effort. Start with the human resources department of your last employer. The department should be able to connect you with the plan administrator or tell you if the account has been transferred to a new provider. If you have an old statement, you can skip this step and contact the plan administrator or record keeper directly.
Search databases if you’re still unsure.
You can use your Social Security number to search for old retirement plans in various databases, either by yourself or with the help of a financial advisor. Try government websites, such as the Department of Labor’s Abandoned Plan Search and the U.S. Pension Guaranty Corp. for unclaimed pensions. You could also use databases such as the National Registry of Unclaimed Retirement Benefits, the National Association of Unclaimed Property Administrators site MissingMoney.com, and FreeErisa, an employee benefits database. These databases compile information on lost retirement accounts and are publicly accessible.
Cashing out is one option, but that would mean paying taxes and early withdrawal penalties. Alternatively, you could roll it over to your new employer’s retirement plan. Another option is to roll it over into an individual retirement account (IRA). Another option would be to leave the account at your current company.
Please contact our team if you need help with the planning phase, locating an old account, or if you have general financial questions.