Today’s migratory workforce, in an unsteady economy, means that many of my peers are changing jobs every couple of years. Many millennials are saving in their employer retirement accounts, but the mobility of this generation creates a challenge for those employees as they begin accumulating assets for retirement: multiple low-balance 401(k) accounts with a handful of different employers. Often, for young employees, these balances are pretty small, representing one to two years of their contributions, plus perhaps a small amount of vested employer contributions. If participants were automatically enrolled, or if their accounts consist solely of employer safe harbor contributions, they might not have even logged in to check their account balances.
We’re busy: in a recent survey by Northwestern Mutual, 38% of millennials, also known as Generation Y, responded that they are “always” or “often” too busy to think about long-term goals, so rolling over an account from a previous employer might be pretty low on your to-do list, but here are a few reasons to do it sooner rather than later:
• It’s easy to think of a previous employer’s plan as static, but it’s not. Consolidating accounts is usually a simple and painless process: Decide where you’d like to consolidate accounts (a new employer’s plan, or an IRA); submit your rollover request (note, you may need to complete paperwork for both the distributing and the receiving institutions); then confirm the rollover has gone through as planned. Taking the time to complete these steps should give you a more comprehensive view of your savings to date, enabling you to better determine your future path to retirement readiness.
• If a former employee’s account has less than $5,000, depending on the rules of the plan, the employer may decide to roll it out of their plan, creating an IRA. If you haven’t updated your address and have missed the information sent about the account, you might not get to choose where your money goes, or how it’s invested.
• The service provider for a previous employer’s 401(k) plan could change, which would mean a new website to manage your account and potentially new investments or plan rules. The fee structure could change significantly. Again, if your address hasn’t been updated, you might miss those important notifications.
• Some plans will charge an additional fee to let you leave an account in the plan after you have stopped working for that employer.
It’s easy to think of a previous employer’s plan as static, but it’s not. Consolidating accounts is usually simple and painless – with most 401(k) providers, a rollover transaction can be completed online, or with a short form, in less than half an hour. It is an easy way to simplify the management of retirement accounts, giving you a comprehensive view of savings to date and enabling you to better determine your future path to retirement readiness.