$3.1 Trillion Dollars Have Been Left Behind At Old Jobs: How To Avoid This

What’s up everyone!

I saw this wild stat last month “With the average person changing jobs every 4 years, over $3.1 trillion dollars have been left behind at old jobs collecting huge fees.”

Think about that, $3.1 trillion dollars have been left behind. All because people don't know what to do with their old retirement accounts when they leave their job. So today, I am going to educate you on how to find them, best practices of what to do when you leave a job, etc.

If you are about to leave your current job, you have a few options of what to do with your 401(k):

1. You can roll it into your new 401(K), 403(b), etc. I find this to be the best option more times than not. The only time you really do not want to do this is if your new 401(k) is really expensive and lacks quality investment options. Other than that, I do not see many reasons to not send it here.
2. You can roll it into an IRA. An IRA is an individual retirement account. This is a pretty simple process and can work well, but the reason I do not like it is because it stops you from being able to do backdoor ROTH IRA contributions in the future and here’s why. To do a backdoor ROTH you put money into an IRA, you do not deduct the contributions, then you convert it to ROTH. However, if you have an old 401(K) that sits in an IRA, or any other pre-tax IRA money out there, part of this backdoor ROTH becomes taxable. Let’s say you want to do the full $6,500 for 2023 to your backdoor ROTH but you have $6,500 in a pre-tax IRA. This means if you did the backdoor ROTH you would end up having half be taxable. Why? The pro-rate rule. It looks at all your IRA balances and then calculates what it taxable by the percentage of pre-tax vs non deductible. In this example 50% was each, so 50% becomes taxable. This is why I like to move old 401(K)’s or IRA’s into new 401(K)’s when it makes sense.
3. You can roll it into an IRA and convert to ROTH. This means you pay tax to convert this pretax money to post tax. This could be good in really low income years.
4. You Keep it where it is. I don’t like this one as it gets easy to forget about down the road, but sometimes it is the best option if it is invested well.
5. You can cash it out. I think avoiding this in every situation you possibly can is wise, but I had to mention it since it is an option.

So now you know what your options are, but what do you do about those old retirement accounts you can’t find? There’s a few cool services out there that will help you go and find your old accounts. My favorite options are?beagle, National Registry of Unclaimed Retirement Benefits,?Free Erisa, etc. Do not let these funds get forgotten about. Search for them. And if you can't find them, call your old employer and have them help!

And with your next job change, make the move right away. That is the best and easiest time to do it.

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If you have any questions, feedback, or want to meet to get your money right, email me at?thomas@allstreetwealth.com.

See you next month!

- Thomas Kopelman