Don’t Forget About Those Old 401(k) Accounts!

December 09, 2021 | Matt Nowak, AIF®, Associate Director of Defined Contribution

Combination line/column chart showing forgotten 401(k) accounts and associated assets. Chart subtitle: As 2021 draws to a close, plan sponsors should look to begin the new year by helping employees consolidate retirement accounts. Chart description: Left Y-axis shows number of accounts in millions ranging from 0 to 30. X axis shows years from 2013 to 2021. Right Y-axis shows assets in trillion dollars, from 0 to $1.6 trillion. Across both categories, numbers have increased steadily since 2013; in 2021 (as of May), an estimated $1.35 trillion dollars are being held in over 24 million 401(k) accounts. Chart Source: Capitalize Money, Inc., The True Cost of Forgotten 401(k) Accounts white paper; data as of May 31, 2021.

According to a recent study conducted by Capitalize, $1.35 trillion worth of assets were held in forgotten 401(k) accounts as of May 31st, 2021. This figure is based on estimates of 24.3 million retirement accounts with an average balance of $55,400 per account. Based on this study, it is evident that millions of participants are missing out on additional retirement savings each year their old accounts are left behind with previous employer plans, since holding multiple accounts often leads to investors incurring higher fees. To that point, Capitalize estimates that an individual could experience up to $700,000 in foregone retirement savings as a result of forgotten 401(k) accounts. As 2021 draws to a close, plans sponsors should look to begin the new year by helping employees consolidate retirement accounts, which could lead to cost savings and the accumulation of plan assets, by utilizing the following tactics:

  • Confirm participant data, including email and mailing addresses, is up to date to ensure communications will be received
  • Collaborate with the relationship manager of your retirement plan recordkeeper to develop a targeted participant communication strategy (email, hard copy mail, or onsite visits) that highlights the benefits of consolidating retirement accounts from previous employers
  • Ensure communications clearly explain the process for rolling over outside retirement assets
    · Paperwork required to effectuate rollovers can be confusing to many participants, however, the majority of recordkeepers employ support teams available to assist individuals with transfers
    · The phone numbers and email addresses of these support teams should be clearly identified in communications to participants
  • To increase the chances of success when it comes to participant rollovers, communication campaigns should be continued throughout the entire year

Finally, technological developments and the reporting capabilities of retirement plan recordkeepers will allow plan sponsors to measure the effectiveness of these campaigns. By the end of 2022, sponsors should review results related to the number of rollovers completed, the amount of assets gained, and the extent to which employees were actively engaged with the topic during the year. This may help plans delineate future goals and better understand the most effective ways to communicate to participants.

If this is of interest to your plan, please contact your Marquette consultant for additional information.

Print PDF > Don’t Forget About Those Old 401(k) Accounts!

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

 

Matt Nowak, AIF®
Associate Director of Defined Contribution

Get to Know Matt

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

02.19.2025

No Longer Stuck in the Middle?

By now, readers likely know that large-cap equities propelled the U.S. equity market higher in 2023 and 2024, as the…

02.11.2025

Egg Prices Ruffle Consumer Feathers

While investors scrutinize rhetoric from the Trump administration for its potential to ignite another bout of inflation for U.S. consumers,…

02.04.2025

Assessing the Trade War “Battlefield”

The tariff plans announced by President Trump in recent days represent a significant escalation in trade policy and a shift…

01.28.2025

Alternatives to Drive Growth in the Next Real Estate Cycle

As the real estate market evolves, alternative sectors are expected to drive significant growth in the coming years. Senior housing,…

01.23.2025

New Year, New President…Same Outlook?

From an investor’s perspective, the current environment feels lot like it did twelve months ago: U.S. equity markets returned over…

01.22.2025

The Economic Toll of the California Wildfires

Earlier this month, wildfires broke out across Los Angeles County, California, destroying more than 12,000 homes, businesses, schools, and other…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >