Set It and Actually Forget It

Raquel Charles was in her mid-20s when she signed up — begrudgingly — for her first retirement account. Wading through paperwork to start her job at the Administration for Children’s Services in New York City, she would have skipped over the retirement option if not for an older colleague’s intervention.

“She saw that I was young and didn’t know what I was doing,” Ms. Charles recalled. “She told me, ‘Just put away something, even if it’s the bare minimum.’” Ms. Charles decided to contribute 1 percent of her salary.

For the next decade, retirement was the last thing on Ms. Charles’s mind as she focused on her career and family. “I saw a few dollars coming out of my paychecks, but I never thought about it,” she said. It finally dawned on her to check the account when her mother retired last year. “I had to set a new password, because I don’t think I ever created one in the first place,” she said. “When I finally opened it, I was like, ‘Oh my God, I’m in trouble. I have barely any money in here.’”

Now 37, Ms. Charles has increased her retirement contributions and joined a women’s personal finance group on Facebook to learn more about financial planning. “I’m annoyed that I wasted 10 years when I could have saved a lot more,” she said. “When I was younger, I had fewer financial responsibilities and more flexibility. Now, I have two children and a mortgage.”

Despite her frustration, Ms. Charles is faring much better than the millions of Americans who neglect their retirement accounts for much longer — or, in many cases, permanently.

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’s an amount of money most people can’t afford to lose.

“The numbers cannot show if these accounts are truly forgotten, or if people do plan to access the money someday,” said Laura Quinby, a senior research economist with the Center for Retirement Research. “What 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’s there.”

If you’ve 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.

Understandably, many people never get that far. “People have busy lives and other interests. They don’t have the degree of financial literacy that would make them comfortable engaging with their retirement accounts,” 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. “There’s a lot of fear and hassle involved, so it’s easier to avoid it.” The recent market volatility stemming from the collapse of Silicon Valley Bank doesn’t exactly stoke enthusiasm for financial planning, either.

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 — usually less than $5,000 — were more likely to leave them behind. “Unfortunately, that can have very real financial implications,” 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.)

Another problem with ignoring your retirement accounts is, of course, that it’s harder to plan for your future. Most experts recommend checking on your long-term savings around once a year, to make sure it’s invested in accordance with your retirement timeline. But Lara Starr, 54, hadn’t looked at her savings for decades when her husband died unexpectedly a few years ago. “Even though I was the primary breadwinner in my family, my husband managed our money,” she said. “I always found it too stressful.”

After Ms. Starr’s husband died, she realized she had to face her accounts alone. “Opening the binder full of statements that I’d never looked at was one of the hardest things I’ve ever done,” she said. Although she’d put money in a 401(k) throughout her marketing career in Marin County, Calif., she wasn’t thrilled with what she found. “I made a spreadsheet with the numbers, and realized it wasn’t enough,” she said. “So then I had to ask myself, ‘What does that mean?’”

These days, Ms. Starr uses a budgeting app and tracks her cash flow and savings meticulously. “Now, I know what I contribute to my 401(k). I know what it’s building towards. I even did some projections to see what the money might look like in 20 years when I do need to retire,” she said.

Still, Ms. Starr wishes she hadn’t buried her head in the sand for so long. “Saving for retirement feels like standing at the edge of a pool with an eyedropper,” she said. “If I had been more hands-on when my husband was still alive, I’d like to think it would have kicked me into planning and budgeting earlier.” Then again, it’s hard to say. “The reality is, it could have just made me even more anxious about money.”

For others, stumbling upon a long-lost retirement account is a boon. “For most of my adult life, I was so overwhelmed by my student loans that I never really had a financial plan for my future,” said Kathryn Lonczewski, 37. “I couldn’t even think about having assets when it seemed like I had so much debt.”

Then, in 2020, Ms. Lonczewski started a new job at Amazon and was awarded a signing bonus. “I’d never received a chunk of cash like that, so that’s when I started asking questions about my finances.

“Should I pay down debt? Do I invest it? I’d never had choices like that because I’d been living so hand-to-mouth for years,” she said. That’s when she remembered she had a retirement account from a previous job. “I honestly had no idea what I’d find in there,” she said. “It wound up being about $60,000 — much better than nothing. I was pretty happy about it.”

Now a project manager at Yale University in New Haven, Conn., Ms. Lonczewski checks her 401(k) balance each month. “I feel like I have some catching up to do, but it’s also motivating,” 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.

Finding your money

For those who aren’t 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.

In this era of digital records, it’s hard to believe that technology hasn’t solved this problem. But it’s starting to, Mr. Holman said. He oversees Vanguard’s efforts to automatically integrate its clients’ old or abandoned retirement plans into their existing, active ones, a process known as auto-portability. “A participant doesn’t even have to do anything,” he said. “You 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.” This cuts out the time-consuming paperwork involved in the traditional rollover process.

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. “We’re fairly confident that over time, we’ll have broad adoption across the industry,” he said. “You’ll just get a letter that says, ‘You had $3,000 in a retirement account with your old employer. Congratulations, it’s in your new plan.’ And it’ll be a great surprise.”