According to a Department of Labor study, U.S. citizens change jobs at least 12 times during their careers. Due to the constant change, some things get lost along the way, especially if you participated in a 401(k) plan.
To avoid losing it and get the retirement money back, it is now possible to use the Social Security number 401(k) plans. The issue often leaves a lot of money for retirement funds because participants leave employment and forget about the benefit.
What happens to the 401(k) when I leave a job?
The people in charge of administering each company’s 401(k) plans have different procedures for processing accounts left by former employees. Depending on the amount earned, they may distribute them to you, roll them into an IRA in your name, or keep them in a holding account until they are claimed.
No company wants to keep many old employee accounts, so they will look for the quickest way to get rid of them, which will make the search more difficult when you remember them and want them back.
Find your 401(k) again by using your SSN
The National Registry of Unclaimed Retirement Benefits website was designed as a straightforward way to help any employee like you find your old 401(k).
The procedure is simple; when you enter the site mentioned above, you will have to enter your Social Security number in the search engine. It will start analyzing all the plans associated with those digits. When it finds one, the page will contact the plan administrator.
It will also give you the contact information to communicate directly with your plan administrator. You will then receive a benefit election form; fill it out with details on managing your plan funds.
If nothing appears, that is not an indication that it does not exist. When the page does not find information related to your SSN, it could indicate that the employer has not yet registered your information in the database. The solution is to do a daily check with your social security number. New data is added daily.
You have found your 401(k), now what should you do?
When you find your plan, you will have different options to watch and take advantage of; some include penalties and taxes. The first and most common way is to withdraw the funds available in your old 401(k).
If you decide on this option, you should know the IRS’s 10% early withdrawal penalty. Eliminating this penalty is complicated; the recommendation is to leave your funds saved until you reach age 60.
The other choice would be to roll the 401(k) funds into your current plan with your new employer. It has the benefit of no penalties or taxes in doing so because you will be transferring to another retirement account.
You could also consolidate your 401(k) into an IRA; this is also a retirement installment free of taxes or penalties. Here you won’t be able to tie it to the retirement plan you have with your current employer.
Although consolidation will give you more investment options to manage your funds, it is an efficient way to secure your money when it is time to retire.
Keep track so you don’t lose your 401(k) again.
You won’t be checking your 401(k) daily; you don’t have to. To avoid losing your 401 (k), keep track of your funds quarterly or annually to keep track of the account.
If you change jobs again, don’t forget to consolidate your 401(k)s or merge them into the plan with your new employer. The secret is always to keep track of them, so you don’t lose them.
No, benefits from your 401(k) or any other qualified retirement plan will not impact the number of benefits earned in your Social Security each month. These benefits are determined by the amount of money you make during your years of service.
Remember that your 401(k) contributions are from the compensation received monthly from your employment, i.e., you have already paid taxes on those funds.