Back in the day, many people found a job in their 20s and stuck with it until they could retire and claim their pension. However, times have changed, and according to recent data, the average person in the United States changes jobs an average of 12 times during their lifetime.

With most of us putting money away for retirement into 401(k)s…that’s a lot to keep track of.

MarketWatch recently reported that “there were more than 29 million forgotten 401(k) accounts worth more than $1.6 trillion as of May 2023…. The forgotten accounts represented 25% of all 401(k)-plan assets as of 2023, up from 20% in 2021.”

Could you have money just sitting there waiting to be claimed?

The U.S. government recently introduced a new 401(k) registry to help people stay connected with their retirement accounts – even as they move from job to job. (CLICK HERE to access the registry.) Here’s what it is, how it works, and why it’s great news for your financial future.

What is the 401(k) Registry?

The 401(k) registry is a secure, centralized database that allows employees to locate and manage their retirement accounts more easily. It was created to address a growing issue: employees often lose track of old 401(k) accounts when they switch jobs, resulting in billions of dollars in unclaimed retirement funds.

With the new registry, employees will have a straightforward way to:

• Search for past 401(k) accounts.
• Track contributions across multiple jobs.
• Combine or rollover accounts into one consolidated fund.

How Does the Registry Work?

Employers who offer 401(k) plans will be required to report key details about their plans, including participant information and account balances, to the registry. Employees can then use this database to search for their accounts using secure credentials.

Here are a few of the features:

1. Online Search Tools: Individuals will be able to access the registry through a secure government website.
2. Notifications: Automated reminders for employees to claim or roll over their accounts.
3. Privacy Protections: Strict security measures to ensure account information remains confidential.

Benefits of the 401(k) Registry

The 401(k) registry offers significant benefits for employees, employers, and the retirement industry overall.

For employees, it simplifies account management by making it easier to locate and consolidate retirement savings, particularly for those who have worked at multiple companies. This reduces the risk of losing track of accounts and ensures that savings remain accessible. Additionally, the registry helps participants maximize their long-term savings potential by preventing accounts from being lost or abandoned over time.

For employers, the registry promotes greater transparency, enabling them to comply more efficiently with regulatory requirements while streamlining the management of their retirement plans.

Should You Consolidate Your Investment Accounts?

Combining your retirement accounts, such as rolling old 401(k)s into your current plan or an IRA, can simplify your financial life. With fewer accounts to manage, you’ll have less paperwork, fewer fees, and a clearer picture of your overall savings. Consolidation can also make it easier to maintain a consistent investment strategy and manage required minimum distributions (RMDs) once you reach retirement age.

In addition, having your funds in one place may provide access to better investment options and lower fees, depending on the plan. It also makes communicating with your financial advisor simpler.

When Consolidation May Not Be the Best Option

In some cases, keeping multiple accounts separate might be more advantageous. For example, if your old 401(k) plan offers unique investment options or lower fees than your current plan, it could make sense to leave your funds where they are. Similarly, 401(k)s often offer stronger creditor protections than IRAs, which might be important depending on your circumstances.

You’ll also want to consider potential tax implications or penalties before moving funds. Some accounts, such as Roth IRAs, have different tax treatments than traditional 401(k)s, and blending the two could complicate your financial planning.

 

Bottom line: this new registry is a helpful tool to keep you on track and organized. Deciding what to do with the accounts you find could be a conversation you want to have with your financial advisor.

Have questions about your retirement accounts? CLICK HERE to make an appointment.