Abandoned 401(k) Accounts Double in Past Decade

Capitalize Money Inc., a technology company that helps people find missing retirement assets, announced today that the number of abandoned 401(k) accounts in the U.S. has almost doubled over the past decade to an estimated 31.9 million accounts, as of July.

The accounts now hold $2.13 trillion in assets, an increase of nearly 30% since mid-2023, according to a September update to the firm’s 2023 white paper, “The True Cost of Forgotten 401(k) Accounts,” written in partnership with the Center for Retirement Research.

Ongoing job switching; layoffs; higher rates of 401(k) participation, driven in part by the SECURE 2.0 Act of 2022 provision mandating automatic enrollment for new plans; greater asset prices; and confusion at the point of offboarding drove the account balances to the highest they have ever been, the paper explained. The $2.13 trillion figure equates to almost one-quarter of all dollars ($9.3 trillion) held in 401(k) accounts, as of June. Ten years ago, 18.3 million accounts held $1.03 trillion in assets—more than half the new total.

“The ‘forgotten 401(k)’ problem continues to grow in size and complexity, with Americans leaving behind millions of accounts each year as they switch jobs,” said Gaurav Sharma, Capitalize’s CEO, in a statement. “An outdated rollover process and confusion at the point of job change remain obstacles for most savers.”

Although the SECURE 2.0 Act of 2022 has expanded the ability of job-changers to retain their 401(k) assets, such as through automatic portability provisions for balances less than $7,000, not all qualifying balances transfer automatically. Instead, recordkeepers may present 401(k) participants with four options:

• Roll over the 401(k) assets into an individual retirement account;
• Roll over the old 401(k) into a new 401(k) account, if permitted by the new employer;
• Withdraw, or “cash out” the old 401(k) assets (which can result in a 10% penalty for individuals younger than 59.5 who lack qualified exemptions), and;
• Leave the money behind in the former employer’s 401(k) plans.

For some, the best choice to make may be the hardest to carry out. According to a Capitalize white paper, “Stuck In The Past: Why 401(k) Rollovers Remain Outdated and Painful,” published a year ago, the complexity of the rollover process is a chief reason many participants opt to leave their accounts behind. During a job change, workers lose access to their previous employer’s human resources portals and benefits information—causing them to struggle to remember which financial institution holds their legacy 401(k) savings.

At estimated 54% of savers are initially unsure where their old 401(k) is located, and 61% of savers do not know their 401(k) account login details, the 2024 paper stated. If individuals cannot recall where their account is held, it follows that they cannot begin the rollover process so easily.

In December 2024, the U.S. Department of Labor’s Employee Benefits Security Administration launched the public Retirement Savings Lost and Found Database, a tool designed to help America’s workers and beneficiaries search for retirement plans that may still owe them benefits. Created as part of SECURE 2.0, the database serves as a centralized location where individuals or their beneficiaries can search for lost or forgotten accounts and receive guidance on how to claim their funds.