Did you get a new job? Avoid this action that may cost you your retirement funds

[UNITED STATES] Job changes are common, but if you're not careful, they could come at the cost of your retirement savings. When workers switch employers, they typically have four choices regarding their 401(k) plans: roll the funds into their new employer’s plan, transfer them to an IRA, leave them with their previous employer, or cash them out. But neglecting these accounts can be costly—potentially slashing retirement savings by as much as $18,000, according to recent findings.

A study by pension provider PensionBee revealed that fees on a typical 401(k) left behind with a former employer can run up to $4.55 per month. While some employers absorb these costs, the burden often shifts to the employee once they exit the company—and often without much warning.

What makes these fees especially damaging is their long-term impact. As they chip away at the account’s balance, they also reduce the funds available for investment—meaning both principal and potential returns suffer. Over multiple job transitions, this effect can significantly erode overall retirement savings.

Individually, the fees might not seem substantial. But for someone who changes jobs roughly every three years over a 33-year career, the cumulative cost can reach thousands of dollars. Each monthly deduction diminishes the balance and curbs the compound growth that could have otherwise built up over time.

“High fees may shrink rather than grow savings, in some cases, depleting them to $0,” warned Romi Savova, CEO of PensionBee.

A major factor fueling this issue is a widespread lack of awareness. Many workers are unfamiliar with the fee structures tied to dormant 401(k)s and the financial implications of not rolling them over. Improved financial literacy and employer education initiatives could help bridge that knowledge gap.

The scale of the problem is striking. Fintech firm Capitalize estimated that, as of May 2023, over 29 million 401(k) accounts worth more than $1.65 trillion were sitting forgotten. In response, the federal government launched the Retirement Savings Lost and Found Database, designed to help individuals locate old pension and 401(k) accounts.

This new database marks a significant step toward addressing the problem, providing a centralized tool to help Americans reclaim misplaced retirement funds. Still, experts stress the importance of proactive account management. Regularly reviewing and consolidating retirement plans can reduce the chances of accounts being forgotten or drained by fees.

“If you have multiple accounts, most people benefit from consolidating them to gain control and ensure their savings aren't left behind, where they could be lost or eroded,” said Savova.