Many Americans invest for retirement with employer-sponsored accounts. But what happens to those accounts when we switch jobs? The short answer: nothing.

We’ve left a lot of money behind

The value of all “orphaned” retirement accounts—employer-sponsored accounts that no longer receive contributions once an employee leaves a job—is estimated to be more than $100 billion in the United States. That’s a lot of money sitting idle. The main reason why orphaned accounts exist and have grown to represent so much of the country’s investment capital is because the majority of working Americans don’t know they have one. If you’ve ever left an employer who was matching your contributions in a 401(k) plan, the chances are high that you received an email or notice in the mail about your orphaned account after you left. But notices go ignored, time passes and after a few weeks on the new job, you no longer think about the untied loose ends from the last one – which may include your retirement plan. So, what can you do if you think you might have an orphaned account?

Track it down

If you’re unsure about contributions you’ve made to an employer-sponsored retirement plan, you can take steps to find out how to access your orphaned account (or simply find out if you have one) by contacting your former employer. Most companies’ human resources departments have information about their investment custodians and can put you in touch with them. Once you find your custodian, you may have to remember answers to security questions that you established years ago. But once you find and access your orphaned account, what happens next? Generally, you are left with two options: cash out or roll over.

The cost of cashing out

The mistake that many individuals make once they discover orphaned retirement accounts is to immediately cash them out without considering the tax penalties. If you are under the age of 59 ½, any early withdrawal from a 401(k) retirement plan is subject to the same income tax rate you would pay on your annual income (as these types of withdrawals are considered additional income). There is also a tax penalty on your withdrawal. Those who choose to withdraw will end up paying the penalty in addition to regular income tax. But, if you would rather keep more of the money you discover in an orphaned account (and don’t mind waiting to access it), you may have the option to roll over your orphaned retirement plan into your new employer’s 401(k) plan or an individual retirement account (IRA) that you can actively contribute to and allow your money to continue growing tax-deferred. You can learn more about the different types of IRAs here.

If you rediscover an old retirement savings account, always consult your tax or financial advisor before making decisions about what to do with the money it holds.

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