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

by James · April 27, 2023

A job change often arouses 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 is often overlooked. Employees and their former employers often contribute to 401(k) accounts, but what happens to the funds during a job change?

Did you know? That’s about $1.35 trillion in forgot 401(k)swhich can cost a person nearly $700,000 in abandoned retirement.

The problem: 401(k) accounts that don’t automatically roll over to a new employer’s plan

A 401(k) does not automatically transfer to a new employer’s plan. This issue is of particular concern to those who change jobs frequently and accumulate multiple 401(k) accounts. In certain cases, employees can leave their 401(k) with their former employer, normally subject to plan regulations and balances. Alternatively, if a new employer accepts rollovers, an employee can choose 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 the 401(k) with the previous employer or rolling over to the new employer’s plan

It’s a New York-based fintech that helps individuals transfer their 401(k)s or 403(b)s. Capitalize’s service is free – as in, free to 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 manage the entire process of transferring it to another retirement plan, usually an IRA.

While the company specializes in helping individuals rollover their 401(k)s or 403(b)s, its current focus is on facilitating rollovers to 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 to account holders. Facilitating transfers directly to new employer-sponsored 401(k) plans can be more complicated due to varying plan rules and administrative processes across different employers. By focusing on IRA rollovers, Capitalize streamlines the service and provides a more consistent experience for users.

Retirement accounts are tax-deferred investments that come with contribution limits, time rules and other restrictions that can cost you if you don’t follow them. You can be hit with significant penalties for simple mistakes such as withdrawing money too early, contributing more than you are allowed to or delaying the transition period. Sometimes your old company or the new brokerage you’ve chosen may have issues that increase the time it takes to complete a rollover, putting you dangerously close to the 60 window allowed for most rollovers. Using Capitalization means you will complete the transition on time without any problems.

The process is quick and easy. You can do it all online using the company’s interactive forms, and if you get stuck anywhere along the line, human experts are available via instant live chat. Using a service like this means no tax surprises later because you misunderstood the terms of a rollover. You can safely move your pension money to a better platform without cost and without confusion. Making money doesn’t get any better than that.

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This article How Fintech Companies Can Help You Find and Transfer Your Forgotten 401(k) originally appeared on Benzinga.com