Raquel Charles was in her mid-20s when she signed up \u2014 begrudgingly \u2014 for her first retirement account. Wading through paperwork to start her job at the Administration for Children\u2019s Services in New York City, she would have skipped over the retirement option if not for an older colleague\u2019s intervention.<\/p>\n
\u201cShe saw that I was young and didn\u2019t know what I was doing,\u201d Ms. Charles recalled. \u201cShe told me, \u2018Just put away something, even if it\u2019s the bare minimum.\u2019\u201d Ms. Charles decided to contribute 1 percent of her salary.<\/p>\n
For the next decade, retirement was the last thing on Ms. Charles\u2019s mind as she focused on her career and family. \u201cI saw a few dollars coming out of my paychecks, but I never thought about it,\u201d she said. It finally dawned on her to check the account when her mother retired last year. \u201cI had to set a new password, because I don\u2019t think I ever created one in the first place,\u201d she said. \u201cWhen I finally opened it, I was like, \u2018Oh my God, I\u2019m in trouble. I have barely any money in here.\u2019\u201d<\/p>\n
Now 37, Ms. Charles has increased her retirement contributions and joined a women\u2019s personal finance group on Facebook to learn more about financial planning. \u201cI\u2019m annoyed that I wasted 10 years when I could have saved a lot more,\u201d she said. \u201cWhen I was younger, I had fewer financial responsibilities and more flexibility. Now, I have two children and a mortgage.\u201d<\/p>\n
Despite her frustration, Ms. Charles is faring much better than the millions of Americans who neglect their retirement accounts for much longer \u2014 or, in many cases, permanently.<\/p>\n
The Center for Retirement Research at Boston College estimates that about 21 million vested retirement accounts in the United States are inactive, meaning that they are eligible to be tapped but sit dormant instead. The same researchers calculated in 2018 that the average value of assets in these inactive accounts was about $60,000, with a median amount of about $15,000, based on data from the U.S. Census Bureau and the Department of Labor. That\u2019s an amount of money most people can\u2019t afford to lose.<\/p>\n
\u201cThe numbers cannot show if these accounts are truly forgotten, or if people do plan to access the money someday,\u201d said Laura Quinby, a senior research economist with the Center for Retirement Research. \u201cWhat we do know, though, is that a lot of people lose track of their retirement savings when they switch jobs, so they might not remember that it\u2019s there.\u201d<\/p>\n
If you\u2019ve ever tried to roll over a retirement account, you can probably relate. I had several different jobs at the beginning of my career, all of which offered 401(k) benefits. By the time I reached my 30s, I was dimly aware that I had three separate retirement accounts (all containing paltry amounts) floating around with former employers. Figuring out how to retrieve and consolidate them took days of phone calls, paperwork and coordination with different financial firms.<\/p>\n
Understandably, many people never get that far. \u201cPeople have busy lives and other interests. They don\u2019t have the degree of financial literacy that would make them comfortable engaging with their retirement accounts,\u201d said Steven Holman, who helps oversee record-keeping and asset management at Vanguard, a company that provides investment management and retirement account services for more than 30 million clients. \u201cThere\u2019s a lot of fear and hassle involved, so it\u2019s easier to avoid it.\u201d The recent market volatility stemming from the collapse of Silicon Valley Bank doesn\u2019t exactly stoke enthusiasm for financial planning, either.<\/p>\n
Stranded retirement accounts are even more prevalent among workers with lower incomes and savings rates (ironically, those who need their savings the most). A report from Vanguard found that those with smaller retirement account balances \u2014 usually less than $5,000 \u2014 were more likely to leave them behind. \u201cUnfortunately, that can have very real financial implications,\u201d Mr. Holman said. For instance, when a worker leaves a job with less than $5,000 in their 401(k), their former employer is allowed to move that account into a Safe Harbor individual retirement account, which is overseen by a different provider that may impose higher management fees. (Employers are motivated to do this because holding onto a lot of small, inactive accounts can be a costly administrative headache.)<\/p>\n
Another problem with ignoring your retirement accounts is, of course, that it\u2019s harder to plan for your future. Most experts recommend checking on your long-term savings around once a year, to make sure it\u2019s invested in accordance with your retirement timeline. But Lara Starr, 54, hadn\u2019t looked at her savings for decades when her husband died unexpectedly a few years ago. \u201cEven though I was the primary breadwinner in my family, my husband managed our money,\u201d she said. \u201cI always found it too stressful.\u201d<\/p>\n
After Ms. Starr\u2019s husband died, she realized she had to face her accounts alone. \u201cOpening the binder full of statements that I\u2019d never looked at was one of the hardest things I\u2019ve ever done,\u201d she said. Although she\u2019d put money in a 401(k) throughout her marketing career in Marin County, Calif., she wasn\u2019t thrilled with what she found. \u201cI made a spreadsheet with the numbers, and realized it wasn\u2019t enough,\u201d she said. \u201cSo then I had to ask myself, \u2018What does that mean?\u2019\u201d<\/p>\n
These days, Ms. Starr uses a budgeting app and tracks her cash flow and savings meticulously. \u201cNow, I know what I contribute to my 401(k). I know what it\u2019s building towards. I even did some projections to see what the money might look like in 20 years when I do need to retire,\u201d she said.<\/p>\n
Still, Ms. Starr wishes she hadn\u2019t buried her head in the sand for so long. \u201cSaving for retirement feels like standing at the edge of a pool with an eyedropper,\u201d she said. \u201cIf I had been more hands-on when my husband was still alive, I\u2019d like to think it would have kicked me into planning and budgeting earlier.\u201d Then again, it\u2019s hard to say. \u201cThe reality is, it could have just made me even more anxious about money.\u201d<\/p>\n
For others, stumbling upon a long-lost retirement account is a boon. \u201cFor most of my adult life, I was so overwhelmed by my student loans that I never really had a financial plan for my future,\u201d said Kathryn Lonczewski, 37. \u201cI couldn\u2019t even think about having assets when it seemed like I had so much debt.\u201d<\/p>\n
Then, in 2020, Ms. Lonczewski started a new job at Amazon and was awarded a signing bonus. \u201cI\u2019d never received a chunk of cash like that, so that\u2019s when I started asking questions about my finances.<\/p>\n
\u201cShould I pay down debt? Do I invest it? I\u2019d never had choices like that because I\u2019d been living so hand-to-mouth for years,\u201d she said. That\u2019s when she remembered she had a retirement account from a previous job. \u201cI honestly had no idea what I\u2019d find in there,\u201d she said. \u201cIt wound up being about $60,000 \u2014 much better than nothing. I was pretty happy about it.\u201d<\/p>\n
Now a project manager at Yale University in New Haven, Conn., Ms. Lonczewski checks her 401(k) balance each month. \u201cI feel like I have some catching up to do, but it\u2019s also motivating,\u201d she said. Last year, she started hosting a book club where she and other members of her community meet and talk about their financial goals.<\/p>\n
For those who aren\u2019t sure how to retrieve their lost accounts (or whether any exist), there are a number of ways to find out. One is the National Registry of Unclaimed Retirement Benefits, a database that allows you to hunt down old plans using your Social Security number. The National Association of Unclaimed Property Administrators also runs a searchable website, and the Department of Labor has a special database for abandoned plans.<\/p>\n
In this era of digital records, it\u2019s hard to believe that technology hasn\u2019t solved this problem. But it\u2019s starting to, Mr. Holman said. He oversees Vanguard\u2019s efforts to automatically integrate its clients\u2019 old or abandoned retirement plans into their existing, active ones, a process known as auto-portability. \u201cA participant doesn\u2019t even have to do anything,\u201d he said. \u201cYou go to a new job, open a new plan, and the Portability Services Network will automatically find your old account and transition those assets in short order.\u201d This cuts out the time-consuming paperwork involved in the traditional rollover process.<\/p>\n
Auto-portability only applies to accounts containing less than $5,000, so people with higher balances still need to take a more active role in tracking down their lost savings. But it is helpful for people whose accounts might otherwise be exiled to a Safe Harbor I.R.A. And auto-portability technology is expanding, Mr. Holman added. \u201cWe\u2019re fairly confident that over time, we\u2019ll have broad adoption across the industry,\u201d he said. \u201cYou\u2019ll just get a letter that says, \u2018You had $3,000 in a retirement account with your old employer. Congratulations, it\u2019s in your new plan.\u2019 And it\u2019ll be a great surprise.\u201d<\/p>\n