Have you ever switched jobs and forgotten to roll over your old 401(k) or IRA from your old company? Have you ever done that 2-3 times? If the answer is yes, then you’re one of the millions of Americans who has done the same.
If you’re between the age of 18 to 34, then you’re part of the majority (56%) in your age group that has an old retirement account at a previous employer, according to a survey by ING. If you’re 35-44, this makes you part of the 40% that have also not rolled over previous retirement accounts.
This commonplace mistake is now seeing Sens. Elizabeth Warren (D-Mass.) and Steve Daines (R-Mont.) reintroduce the Retirement Savings Lost and Founds Act of 2021 on May 21 in an effort to reduce the number of people missing out on their savings.
The bi-partisan bill was first introduced in 2016, and would use data that employers already report to create an online database of where your money is. It would also require plan sponsors to send lost, uncashed checks of less than $1,000 to the Office of Retirement Savings Lost and Found, reports Pensions & Investments. The lost and found would be an office created as per the bill’s instructions.
In a news release, Warren points to a 2017 study by TIAA-CREF that states “30% of employees — tens of millions of Americans — left a retirement account at their previous employer. And according to the Government Accountability Office, millions more have left two or more accounts behind.”
The release also added that between 2004 and 2013, there was a total of $8.5 billion sitting in lost retirement plans with just $5,000 or less in them.
Younger employees have a tendency to forget to roll-over their accounts, as the study also showed that 43% of Gen Xers and 35% of Gen Yers have left a retirement account at their previous employer.
Just as financial literacy is often not taught in school, retirement savings plans and how they operate is also overlooked. Rolling over these accounts, especially if they are held within a different financial institution can be confusing and cumbersome, which could explain the majority of 18-to 34-year-olds that have old accounts sitting with their old employers.
This new database could help to streamline the process, especially for accounts with smaller amounts which could be from the first few jobs in one’s career. The help comes at a critical time as Warren states the problem is only expected to grow in the coming years as young workers switch jobs at much higher rates than their older counterparts and Americans are “already an estimated $7.7 trillion short on what they need for their retirement.”
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