Your forgotten retirement account could be costing you money

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Starting a new job can be an exciting time, and for many people, it's easy to forget about the employer-sponsored retirement account they left behind.

Capitalize, a company that helps people roll over retirement accounts, estimates that 31.9 million 401(k) accounts were left behind or forgotten as of July 2025. Those accounts hold about $2.1 trillion in assets, up almost 30% from mid-2023. The firm says the number of forgotten 401(k)s has almost doubled over the last decade.

Even if people haven't really forgotten about these accounts, doing nothing can still cost them. When 401(k)s are left alone, and the balance is small, that money is sometimes automatically rolled over into an IRA. That can come with several drawbacks, such as hidden fees and limited investment options that may not align with your overall retirement plan.

"The biggest mistake is just never deciding," said David Talley, CFP® at Talley Wealth. "People change jobs, the old 401(k) sits there, and nobody's thinking about what those dollars are for anymore."

What happens to your 401(k) balance when you leave a job?

When you leave an employer, you have a few different options to choose from regarding your retirement account.

Employees with a smaller balance of under $1,000 may automatically be sent a check. Those with a larger balance can still opt to cash out, though this is typically not recommended, as it may incur taxes and penalties for those under age 59½.

Workers can also roll over their 401(k) or 403(b) into an individual retirement account (IRA) at a brokerage.

Alternatively, many workers choose to roll over their 401(k) or 403(b) into their new employer's plan to keep their retirement savings all under one roof. Some employees choose to leave their money where it is, and as long as your balance is over $7,000, most plans allow you to keep your money invested.

Employees with balances of more than $1,000 and up to $7,000 may have those funds automatically rolled over by their plan administrator into a "safe harbor" IRA without that former employee's consent.

This is where choosing the path of least resistance can lead to losing money over time.

How neglecting an old 401(k) can affect your retirement savings

According to a white paper from PensionBee, a retirement provider that offers IRAs, using data from the Employee Benefit Research Institute (EBRI), the number of automatic rollovers is projected to double from 1.1 million per year in 2022 to 2.2 million annually in 2030. By then, an estimated 13 million accounts holding roughly $43 billion in retirement savings could be sitting in safe harbor IRAs, the paper estimates.

The concern with allowing those funds to be automatically rolled over without understanding the terms and conditions of the automatic IRA is that workers could be hindering their own retirement savings progress.

Unlike traditional IRAs, which allow you to invest your funds in practically any stocks, bonds, or funds you choose, safe harbor IRAs are typically ultra-low-risk money market funds that have minimal returns and may come with a number of fees that eat into your balance. The white paper suggests that the longer an account stays in an automatic rollover IRA, the more likely it is to decline in value after one year. After eight years, 4 in 10 accounts were worth less than when they arrived, according to the white paper.

Talley says another common mistake people make with their old 401(k) accounts is cashing out because the balance feels small, and paying tax, and usually a penalty, on money that was supposed to be for retirement.

"The third is rolling everything to an IRA on autopilot without looking at what the old plan or the new one actually does well," Talley said.

If you suspect you have forgotten retirement savings floating around, contact the human resources department at your old employer(s) for the plan administrator information.

Once you track down your money, you can leave it where it is, cash it out if it makes sense for your financial plan, roll it over into an IRA, or roll it over into your current employer's plan.

"Find out what it's invested in and what it's costing you, and then make a decision about it, even if the decision is to leave it alone," Talley said.

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