The Price of Leaving 401(k) Money Behind

The average baby boomer has worked for six different employers over the course of their career, not counting jobs before age 24, according to the Bureau of Labor Statistics. That’s a lot of opportunities for retirement savings to be overlooked or lost. “People tend to forget that they have old 401(k) plans from past jobs,” says Amie Agamata, a certified financial planner based in San Diego and president-elect of NexGen, the Financial Planning Association’s group for new and aspiring financial planners.

In retirement, a forgotten 401(k) account can cost you both time and money. One of Agamata’s clients can’t access her 401(k) account from a company that has now gone out of business and has to search state abandoned property records in hopes of finding the missing funds.

Even if you’ve kept track of all your accounts, having too many of them complicates retirement planning unnecessarily. It means more companies to contact if you move or want to change beneficiaries, and more rules for you to follow — or risk hefty penalties for getting any of them wrong. This is particularly important once you turn 72 and must begin taking required minimum distributions. A missed RMD is hit with a 50% penalty on the amount that should have been withdrawn.

By consolidating accounts as retirement nears, you’ll also be able to organize and manage your investments better, with the potential to save on fees and taxes, according to financial planners. “Simplification is the advantage of consolidating retirement accounts,” says Zaneilia Harris, a certified financial planner based in Upper Marlboro, Md., and author of Finance ‘n Stilettos (Dog Ear Publishing, $18). “Knowing how much you have can help you manage your portfolio and evaluate your individual holdings so they align with your current financial goals.”

The Pinch to Your Portfolio

Leaving 401(k) savings with a former employer can also take a bigger bite out of your investment portfolio. Although a former employer must let you keep the money in the 401(k) if the…

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