TODAY WE ARE TALKING ABOUT OUR OLD RETIREMENT ACCOUNTS. WHY?
As you may have heard, the labor market is very tight. This means we are likely to see increased churn in the labor market as people try to take advantage of the fact that the negotiating power currently rests with workers, not employers. As people leave jobs and change retirement plans, one of the things to remember is to take care of your retirement accounts. Remember, these accounts they are holding your money, and your future, so you want to make sure you track them down and make them work for you!
WHAT IS THE BEST WAY TO FIND OLD ACCOUNTS?
The easiest way to find old 401k is to contact your previous employer, and ask them for the plan administrator information. Once you have that, simply reach out to the administrator. If you are not sure whether you participated or not, check anyway. It is better to be safe than sorry. Reach out to the human resources department at your old employer and simply ask them if you participated in their 401k plan. Have your full name, social security number and the dates you worked for there on hand when you contact them.
Sometimes as a result of mergers, bankruptcies, relocations, or other events, you cannot just ring up your old company. In this case, try to locate an old 401k plan statement to see if it contains any contact information for the firm that administered the plan, and then contact them. If you cannot do that, seek out former employees you worked with to see if they still have any records that will help you locate the plan administrator for your old account.
WHAT IF WE STILL CANNOT FIND OUR ACCOUNT?
There are a few more ways to track down your old accounts. Because most plans are required to file an annual “Form 5500” with the government, you can search for your former employer’s 5500 on a number of websites, like www.freeERISA.com. If you can find a Form 5500 on an old plan, it will have contact information. You can also check with the National Registry of Unclaimed Benefits to see if your former employer has listed you as a missing participant.
The registry is a nationwide, secure database listing of retirement plan account balances that have been left unclaimed. This website is designed to help match employers with abandoned or forgotten employee retirement account balances with the former employees. Finally, you may also find information at the Labor Department’s Abandoned Plan Database. This search helps you find out whether a plan is in the process of being, or has been, terminated and the name of the Qualified Termination Administrator, who you can then contact about your account.
ONCE WE FIND THEM, WHAT DO WE DO WITH THESE ACCOUNTS?
There are a number of routes you can take. First, you can keep the account where it is, now that you have located it. Most companies allow former employees to keep their money in their plan if it is over $5,000, but you can’t continue to make contributions or take loans. This route is not something I would recommend unless the plan has significant benefits, such as very low fees or money management services you really appreciate.
You can also roll your old 401(k) assets into an IRA. This option still allows your money to grow tax deferred, and gives you more investment options that the typical employer plan. You can also continue growing your retirement savings in a rollover IRA through IRA contributions to the account. Make sure to research IRA fees and expenses when selecting an IRA provider, though. These fees vary greatly from firm to firm.
Finally, you may be able to roll your old accounts in to your current employer’s plan. However, not all employers will accept a rollover from a previous employer’s plan, so you will need to check with your current plan administrator. Some of the benefits of going this route include the simplicity of having one account, making it easier to track and manage, as well as broader creditor protection than an IRA. However, you want to keep in mind that an employer 401(k) plan may have a limited number of investment options compared with an IRA, and that you are subject to the new employer’s plan rules, such as transaction limits.
CAN WE CASH THEM OUT?
No, you do not want to give in to that temptation. If you do , you will incur big tax penalties. The consequences vary depending on your age and tax situation, but if you tap your 401(k) account before age 59½, it will generally be subject to both ordinary income taxes and a 10% early withdrawal penalty.
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