Looking for new opportunities? There’s $1 trillion sitting in orphaned retirement accounts owned by workers who changed jobs and left their 401(k) money in their old plans or have older IRAs.
Today’s workers will have seven jobs during the course of their careers, and it’s estimated that half of them have left money in a previous employer’s plan. The problem exists even among wealthier workers — a quarter of those accounts fall in the $10,000-$50,000 range, ING Direct estimates.
According to EBRI, workers with more than one retirement account have a higher percentage of stocks than the norm — introducing unnecessary risk as people approach retirement. While cashing out is the worst thing workers can do, leaving money in an old plan that has low fees or great investments may not be a bad idea as long as the money is being managed in an integrated portfolio. Workers who don’t pay attention may lose the money in abandoned IRAs through state escheatment laws, and 401(k) plans at risk in plans that are terminated or companies that go out of business.
Advisors who think this $1 trillion is too fragmented to be worth pursuing only have their sales hat on. In fact, marketing to all participants in current plans to consolidate their old 401(k)s and IRAs into their current plan or an omnibus IRA could actually add up, especially if 50% of them are likely to have an abandoned account. It’s also an interesting way to distinguish yourself.
