Whether you quit on your own accord, are fired, or laid off, leaving a job can be hectic. In the midst of the transition, dealing with a retirement account might get pushed pretty low on your to-do list.
While the money you contributed is yours forever, accounts can sometimes get forgotten about in the shuffle. And, in some cases, you may not have even realized you’d had a retirement account if your employer automatically signed you up and withheld contributions.
Whether intentional or not, you can wind up with a handful of retirement accounts at different companies and lose track of some of them over time. Former employers and plan administrators may lose track of your current contact information.
Here’s how to check and track down old accounts, and what you can do to get your finances organized.
Finding Old Retirement Accounts
You may want to start by contacting your former employers and the plan administrators, the companies that ran the retirement plan. Sometimes, you’ll find that your retirement account is still there and chugging along as is, hopefully growing in value over time. If you want, you may be able to leave it there, although update the company with your current contact information so it can let you know about any important changes.
However, it’s not always that easy. If your account had less than $5,000 in it when you left, the plan administrator can transfer the funds to an individual retirement account that was set up in your name. If it had less than $1,000, the company may have tried to send you a check for the amount to the address it had on file. You may also have trouble tracking down the account if the company went bankrupt or switched plan administrators, leaving it up to you to figure out who is holding onto the money now.
One thing is certain—other companies don’t get to keep your money. If a company can’t figure out how to contact you, it has to turn unclaimed funds over to state agencies. You can start searching for your unclaimed funds in these databases:
- The Unclaimed.org and MissingMoney.com databases are run or endorsed by the National Association of Unclaimed Property Administrators. It’s a good place to search for all sorts of unclaimed funds, not only forgotten retirement plans.
- The U.S. Department of Labor has an Abandoned Plan Search tool that’s specifically for retirement plans that don’t have a plan sponsor or plan administrator. This could help you track down a retirement plan if your former employer or plan administrator.
- The National Registry of Unclaimed Retirement Benefits can also help you find retirement plans if your former employer registered with the service.
Once you find your account or money, you’ll still need to decide what to do with it.
What Are Your Options for Old Retirement Plans?
You generally have four options for dealing with money that’s in an employer-sponsored retirement account when you’re no longer working at the company:
- Leave the money where it is: Although you might not be able to contribute to the account any longer, you may be able to leave the money in your former employer’s plan. Sometimes, you may need to meet a minimum account balance to qualify, such as $200 for a TSP or $5,000 for some 401(k)s.
- Transfer funds to a new employer-sponsored plan: If you have a new job with a company that sponsors a retirement plan, you may be able to “roll over” the money into your new employer’s plan. When this is an option, compare the previous and new plan’s fees, terms, and investment options to see which is best.
- Roll over to an individual retirement account: You can also move the money into an individual retirement account (IRA). An IRA may give you more control as you can choose where to open the account and invest in a wider range of funds. It’s also fairly easy to move from one IRA to another as the account isn’t tied to your employer. However, IRAs could have more fees, especially if you don’t have a lot of assets and don’t qualify for lower-cost investment funds.
- Cash out: You can also take the money out of retirement accounts completely. But unless you’re 59½ or older (55 if you just left the job), you may need to pay a 10 percent early withdrawal penalty in addition to income taxes on the money.
Picking the Best Option
Figuring out what to do can be difficult, as there may be complex tax and investment return implications for each decision.
In many cases, unless you’re ready to retire, moving the funds into a new retirement account is often a good option. If your funds are in an IRA that was opened in your name, the IRA provider may be charging high fees. And, unless the old employer offers a much better plan than your current options, consolidating your money within a few accounts can make it easier to track your investments and help you qualify for discounts or benefits from plan administrators.
The easiest way to do this is with a direct transfer, where the money never touches your hands. Otherwise, 20 percent of the money has to be withheld for taxes, and you only have 60 days to deposit the funds into the new retirement account or the withdrawal will be treated as a cash out.
Fair warning, there can still be a lot of paperwork involved with a direct transfer. However, the company that you’re sending the money to will often be able to help you with the process.
No matter what option you choose, if you’ve got old retirement accounts floating out there it’s in your best interests to track that money down sooner than later. The more you know about your retirement funds, the more options you may have the next time you’re faced with a major financial setback. At the very least, you’ll understand where you stand as you prepare for retirement.