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Job-hopping millennials leave behind 401(k) plans, costing them thousands

Posted at 6:06 AM, Jul 18, 2018
and last updated 2018-07-18 09:40:47-04

If you had a pot of money with $5,000, $20,000 or even $40,000, would you forget about it?  Some millennials are doing just that.

“It's definitely something I think is pretty widespread,” said financial planner Ryan Frailich, founder of Deliberate Finances, which works with millennial investors. 

A. T. Kearney’s 2017 Future of Advice Study shows 59 percent of millennials between the ages of 25 and 34 with tens of thousands saved had at least one 401(k) at a prior employer. The same was true for only 41 percent of investors overall. 

Why is the millennial generation leaving 401(k)s with former companies?

“With a lot of younger people, they are changing jobs more frequently than generations have in the past,” Frailich says. 

These U.S. Department of Labor stats show millennials are job-hopping more than older workers. Some of Frailich’s clients have left several 401(k)s behind.  Many tell him when they change employers life can get stressful and busy.  

“Money for your 60s isn't really on your mind if you're moving cities, and changing to a new job, and having to find a new place to live,” Frailich says.

But leaving that money with former employers can cost you. Frailich had a client who left $10,000 unattended in an old 401(k). The account only made $400 over time. 

His calculations found if other, more appropriate investments were made it could have increased by $12,000, giving her a total of $22,000.

“The risk is that if you don't sit down to make an affirmative choice you might be leaving it in something that's an inappropriate investment,” Frailich says. 

Another risk is if the employer goes out of business, you may have a tough time tracking down your old 401(k).

“Now you have to figure out 'how do I get an employer signature from a company that no longer exists?' because a signature from your employer is often required," he says.

Experts say you don’t have to immediately move your money as soon as you change jobs … just don’t neglect it or forget about it.

"You might have better options elsewhere, but if you don't sit down and look at it you know you can't know that," Frailich says.

If you are trying to find an old 401(k) call the human resources department at your old company. 

If the place you worked closed and you’re having trouble locating your money, check out these sites for more information. 

National Registry of Unclaimed Retirement Benefits: 
https://www.Unclaimedretirementbenefits.com

Pension Benefit Guaranty Corporation:
https://www.Pbgc.Gov/news/press/releases/pr17-12

https://www.Pbgc.Gov/prac/missing-participants-program

https://www.Pbgc.Gov/prac/missing-p-defined-contribution