How To Find An Old 401 And What To Do With It
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There are billions of dollars sitting unclaimed in ghosted workplace retirement plans. And some of it might be yours if youve ever left a job and forgotten to take your vested retirement savings with you.
But no matter how long the cobwebs have been forming on your old 401, that money is still yours. All you have to do is find it.
S To Take Now To Improve Your Retirement Readiness
While the average 401k balance at pre-retirement age is around $600K, that balance still falls far below even the no growth column of the savings potential chart for the same age. And while $600,000 is no chump change, its also probably not enough to retire comfortably for most people.
Needless to say, many people are falling way below their savings potential. But the good news is, its not too late to turn things around.
Next Steps For Your Money
If your old 401 plan is still with a former employer, one option is to leave the money there. But you may not pay as much attention to the account, which could lead to a portfolio thats not appropriate for your age and risk tolerance.
If youre still working and have a 401 at your new job, another option is to roll over the funds into your existing plan, assuming your employer allows it. Another option is to roll the money into an IRA. Having your savings in one place will make it easier to manage your investments.
If youve lost track of a pension, request a pension benefits statement from the plan administrator. Give the administrator your address and phone number so it can reach you to begin payments. You may need to prove your work history and eligibility for the pension you can do so by providing the plan administrator with old W-2 forms or an earnings statement from Social Security, which you can get by filing Form SSA-7050. You can get this form at www.socialsecurity.gov/online/ssa-7050.pdf or by calling Social Security at 800-772-1213.
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K Savings Potential By Age
The following chart depicts 401k savings potential by age, based on several assumptions. So this is how much you could have saved. These numbers can seem high to many people, especially if you are older and started your retirement savings when the contribution limit was much lower. It can still be used as a guide for your target total retirement savings amounts, including your IRA, Roth IRA, and after-tax savings. While its designed for one person, it can also be used as a guide for a married couple if one spouse decides to no longer work.
The assumptions we used for this chart include:
*Generally, financial planners say the expected rate of return for a 401k is between 8% and 10%.
So, how do you stack up? Are you on the high end? The low end? Do you think these numbers are realistic?
Option : Transfer The Money From Your Old 401 Plan Into Your New Employers Plan
Moving your old 401 into your new employers qualified retirement plan is also an option when you change jobs. The new plan may have lower fees or investment options that better support your financial goals. Rolling over your old 401 into your new companys plan can also make it easier to track your retirement savings, since youll have everything in one place. Its worthwhile to talk with an Ameriprise advisor who will compare the investments and features of both plans.
Some things to think about if youre considering rolling over a 401 into a new employers plan:
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Check On Your 401 Periodically
As mentioned, it’s essential to check how much is in your 401 throughout the year. Ideally, more than once, however, annual checks are enough.
The reason to monitor your retirement savings is to keep up with your retirement goals. For instance, as you near retirement, you may want to move your money to safer investments like bonds. Or, if one area has over-performed others, you might decide to reallocate your money to limit your exposure to one category.
Typically these drastic swings in your portfolio won’t happen that quickly. But by scheduling an annual check of your 401 balance, you’ll get a good picture of your 401 portfolio.
Determine If Your 401 Account Was Rolled Over To A Default Ira Or Missing Participant Ira
One possibility is your employer rolled the funds over into a Default IRA.
If your employer tried to contact you for instructions as to what to do with your account balance, and you fail to respond, you may be deemed a non-responsive participant.
If they are unable to locate you altogether, you may be deemed a Missing Participant.
In either scenario, if the plan is being terminated, your employer may have put the funds in a Missing Participant Auto Rollover IRA.
This is an IRA account set up on your behalf to preserve your retirement assets until they are claimed by you or your beneficiaries under Department of Labor regulations.
To qualify for a Missing Participant or Default IRA, the account balance must be greater than $100 but less than $5,000 unless the funds are coming from a terminated plan, then the $5,000 ceiling is waived.
Finding a Missing Participant IRA
If your money has been transferred to a Missing Participant IRA, you should be able to find it by searching the FreeERISA website.
This search is slightly more time consuming than the national registry. Registration is required to search the database, which contains 2.6 million ERISA form 5500s, covering 1.3 million plans and 1 million plan sponsors.
If you know your money has been transferred to one of these default accounts, you should get it out into a standard IRA account.
Typically, these accounts must be interest-bearing, bear a reasonable rate of return, and be FDIC insured.
Here’s the bad part:
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What Happens If I Have Unclaimed 401 Funds From A Previous Job
The majority of unclaimed money comes from brokerage, checking, and savings accounts, along with annuities, 401s, and Individual Retirement Accounts. Once an account is considered inactive or dormant for a period of time , companies are required by law to mail abandoned funds to the owners last known address. If theyre returned, or the owner cant be reached, the assets must be relinquished to the state.
How Much Retirement Savings Should You Have
There’s no magic savings number that’ll guarantee you financial security in retirement. A good rule of thumb is to stash away enough cash so that by the time you leave the workforce for good, you have 10 to 12 times your ending salary on hand in savings.
But remember, that’s the total you should be aiming for at the time of your retirement. And so if you’re 30 years old and are sitting on a retirement plan balance of $33,472, or something in that vicinity, you may not be in such poor shape.
On the other hand, if you earn a salary of $80,000 a year and you’re already in your 50s, that $33,472 becomes problematic if it reflects your balance. In that case, you might really consider making major lifestyle changes that allow you to pump more money into your retirement plan. Those could include downsizing your home, spending a lot less on leisure, and working a second job.
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How Does Money Get Left Behind
Very few people stay at one employer the entire length of their career.
But unlike your bank account which you may have from job to job, a 401 account is linked to your employer. It is up to you to do something about it.
When you leave your employer, the money may stay in the account for an indefinite amount of time.
However, if the company closes the 401 plan, files for bankruptcy, goes out of business or is acquired by another company, you may be forced to decide, within a short period of time.
Its possible that years will go by after you parted ways with your old job, and then youll get a letter notifying you that you need to move your 401 account, or take a distribution.
If this happens, youre much better off rolling the money into an IRA account, or transferring the money into your current companys 401 plan.
The Number Of Workplace Retirement Accounts With $1 Million Or More Hit An All
Despite surging covid cases and climbing inflation, Americans retirement account balances continue to rise to record levels. Others, though, are fighting to pay rent unable even to think about investing for the future.
Lets look at the haves who are saving for retirement in workplace plans.
Fidelity Investments just released its quarterly analysis of more than 30 million 401 and 403 retirement accounts. Average retirement account balances maintainedan upward trend for the third straight quarter.
Workers who continue to contribute to their plans, even as the pandemic produced some heart-clutching moments in the stock market, were rewarded with significant increases in their account balances, according to Fidelity, the largest administrator of workplace retirement accounts.
In fact, as the pandemic caused people to lose their jobs, 38 percent of 401 savers increased their savings rate. And this wasnt just among older workers, who you might expect would contribute more as they get closer to retirement.
People are really seeing the benefit of long-term investing, said Jessica Macdonald, vice president for thought leadership at Fidelity.
Macdonald said 85 percent of the growth in account balances came from stock market performance.
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Rollover To A New Employers Plan
Check if your new employers retirement plan allows you to move the balance from your old plan into the new plan. However, you should consider the following:
- Does the new plan have better investment options?
- How do the new plans fees compare to the old plans?
- Is it better for you to consolidate your retirement savings into one plan so you have fewer accounts to track?
Search The Abandoned Plan Database
If you cant find your lost money by contacting your old employer, searching the National Registry of Unclaimed Retirement Benefits, or the FreeERISA website, you have one last place to check, the Abandoned Plan Database offered by the U.S. Department of Labor.
Searching is simple, you can search their database by Plan Name or Employer name, and locate the Qualified Termination Administrator responsible for directing the shutdown of the plan.
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Other Investment Accounts For Retirement
In addition to a Wells Fargo IRA and employee-sponsored retirement plans that Wells Fargo services, the financial services company also offers other investment options that you may be using to plan for retirement, including mutual funds, stocks and exchange-traded funds. By opening a WellsTrade® online and mobile brokerage account, you’ll not only be able to access your account online, but you’ll also be able to manage your own investment portfolio.
Visit the Wells Fargo online and mobile brokerage webpage and click “Apply Online” to set up your WellsTrade® account. After you set up your account, you’ll be able to plan for and manage your IRA by choosing the investments you want, entering self-directed online trades, transferring funds between your accounts and accessing this account information any time.
The Average 401k Plan Balance
According to Vanguard, who published its How America Saves report, the average 401k plan balance was $96,495 in 2016.
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While this report is only made up of 401k plan accounts that are held at Vanguard, the company has roughly $1 trillion in defined contribution plan assets which cover virtually all industries. So while it isnt exact, it is a very good representation.
When we break down the numbers further we can see how much the average 401k balance is by income and age range.
However, there is a major issue with these numbers and it is the fact that were using the average balance. When we look at the median 401k plan balance, it was $24,713.Here is the same breakdown of income and age range from above, now with the median values included.
To understand the drastic difference between the two, I need to give a brief refresher on average and median.
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Leave Your Money In The Former Employers Plan
You wont be able to make contributions anymore, but this is an option. This is acceptable as a temporary solution while you look for a new job or research where to open your rollover IRA. But its not recommended for the long term, because the company may change their investment options over time, and it wont be easy to ask questions or make changes if youre no longer working there. If your account balance is less than $5,000, the company may not allow you to leave your money in their plan at all.
Cash out. WARNING! If you take a lump-sum distribution instead of rolling your retirement savings account over to an IRA or a new employers plan, you will have to pay income taxes on the money. You will also pay a 10% early withdrawal penalty if youre under age 59 ½. Not only do you lose money, but you lose valuable time in building savings, and may never catch up.
How Many Lost 401ks And Other Retirement Accounts Are Forgotten
Think lost and forgotten retirement accounts amount to chump change? Although no one keeps data on how much retirement money gets lost or forgotten, in an interview with Bloomberg, Terry Dunne of Millennium Trust Co., made an educated guess based on government and industry data that more than 900,000 workers lose track of 401k-style, defined-contribution plans each year.
That figure doesnt include pensions. According to the Pension Benefit Guaranty Corporation, an independent agency of the U.S. government tasked with protecting pension benefits in private-sector defined benefit plans, there are more than 38,000 people in the U.S. who havent claimed pension benefits they are owed. Those unclaimed pensions total over $300 million dollars, with one individual being owed almost $1 million dollars!
Could that money belong to you?
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How To Use Brightscope
I asked Mike how readers should go about using BrightScope. He suggested the following: visit BrightScope and determine how well your company plan is performing determine how much in expenses you are paying share your rating information with your companys HR department and ask about improving your rating leave comments on BrightScope.com for others to read. Heres a snapshot of the BrightScope Rating :
How Do I Access My Wells Fargo Retirement Account
Wells Fargo & Company is a self-described community-based financial services company with assets totaling almost $2 trillion. Among the products that Wells Fargo offers its customers, retirement accounts provide a savings vehicle outside other types of savings accounts and workplace retirement plans. Customers can remotely access their Wells Fargo retirement account without making a bank visit.
In addition to visiting an account representative at your local Wells Fargo branch, you can access your Wells Fargo retirement account by reaching a Wells Fargo representative over the phone, creating an online account or using Wells Fargos mobile app for your smartphone.
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Leverage The National Registry
The National Registry, run by Pen Check, a retirement plan distribution firm, is a nationwide, secure database listing of retirement plan account balances that have been left unclaimed by former participants of retirement plans.
The site offers an easy, free-of-charge way to locate lost or forgotten employee retirement accounts. You can conduct as many searches as you want, using just your Social Security number. The site is safe, encrypting any information you input on a secure server.