How Fintech Companies Can Help You Locate and Transfer Your Forgotten 401(k)

A job change often sparks excitement for new beginnings and opportunities, but it can also trigger stress related to financial management. Amid the whirlwind of change, the fate of employees' 401(k) retirement accounts frequently goes overlooked. Employees and their former employers often contribute to 401(k) accounts, but what happens to the funds during a job switch?

Did you know? There is roughly $1.35 trillion in forgotten 401(k)s, which can cost an individual almost $700k in forgone retirement.

The Issue: 401(k) Accounts Not Automatically Transferring to New Employer's Plan

A 401(k) does not automatically transfer to a new employer's plan. This issue is particularly worrisome for those who change jobs frequently and accumulate multiple 401(k) accounts. In certain cases, employees can leave their 401(k) with their previous employer, normally contingent on plan regulations and balances. Alternatively, if a new employer accepts rollovers, an employee can opt to move their old 401(k) into the new employer's plan.

So, how does an employee go about finding and moving their old 401(k)?

Solutions: Leaving 401(k) with Previous Employer or Rolling Over to New Employer's Plan

There is a New York-based fintech that assists individuals in transferring their 401(k)s or 403(b)s. Capitalize’s service is free — like, actually free for you, the user. When a user selects one of the IRA providers on the Capitalize platform, the company earns a referral fee. 

The experts at Capitalize identify a user's 401(k) or 403(b) provider from their former employer and manages the entire the process of transferring it to another retirement plan, typically into an IRA.

While the company specializes in helping individuals transfer their 401(k)s or 403(b)s, its current focus is on facilitating rollovers into IRAs. This approach makes sense for several reasons — IRAs often offer a wider range of investment options and lower fees compared to 401(k) plans, which can be beneficial for account holders. Facilitating rollovers directly into new employer-sponsored 401(k) plans can be more complex because of varying plan rules and administrative processes across different employers. By focusing on IRA rollovers, Capitalize streamlines its service and provides a more consistent experience to its users.

Retirement accounts are tax-deferred investments that come with contribution limits, timing rules and other restrictions that can cost you if you don’t follow them. You can get hit with substantial penalties for simple mistakes like withdrawing money at too early an age, contributing more than you’re allowed or delaying the rollover period. Sometimes your old company or the new brokerage you’ve chosen runs into snags that ramp up the time it takes to complete a rollover, putting you perilously close to the 60-window allowed for most rollovers. Using Capitalize means that you’ll complete your rollover in a timely way without hassle.

The process is fast and easy. You can do the whole thing online using the company’s interactive forms, and if you get stuck anywhere along the line, human experts are available via immediate live chat. Using a service like this means no tax surprises down the line because you misunderstood the terms of a rollover. You safely move your retirement money to a better platform with no cost and no confusion. Making money doesn’t get any better than that.