Complexity and Confusion Cause Americans to Ignore Old 401k's
WILMINGTON, DE, November 1, 2010 -- In today's economy, changing jobs every few years is as American as apple pie. So too is leaving behind a large amount in retirement savings at previous jobs. According to a new survey commissioned by ING DIRECT USA's ShareBuilder and conducted by Harris Interactive, Americans are unsure about the process to roll over a 401k into an Individual Retirement Account (IRA) or where to transfer their money. Additionally, many Americans have simply forgotten about their 401k or don't have time to deal with it.
Half (50 percent) of American adults who have participated in a 401k or equivalent retirement plans left a retirement account at a previous employer, according to the survey. While keeping money in a 401k account might be right for some, shockingly, nearly 30 percent of these Americans fail to rollover their retirement savings into an IRA or new 401k because they are unsure about the rollover process and/or where to put their money, don't have the time to roll their retirement money over or have simply forgotten about their account. Of these, nearly one in five (18 percent) have left $50,000 or more in old employee retirement accounts, according to the survey.
"Controlling your retirement savings is a good long term strategy to save time and money," said Dan Greenshields, President of ShareBuilder from ING DIRECT USA. "At ShareBuilder, we're debunking the myth that rolling over a 401k is hard to do or takes a long time. In reality, it's possible to rollover an old retirement account in just 15 minutes."
Leaving Money Behind
Nearly a quarter of Americans (24 percent) with old 401ks have between $10,000-$49,999 in these accounts, according to the survey. Sadly, 11 percent of Americans with 401ks they have not transferred, don't know or can't remember how much money they left in those old accounts.
Interestingly, nearly one in five (19 percent) who are unsure of the rollover process and/or where to move their old 401k account or don't have the time to roll it over have between $25,000 and $100,000 sitting in retirement accounts left at previous employers. Some Americans see advantages to leaving their 401k assets with previous employers. Two in 10 (21 percent) Americans who maintain a 401k account at previous employers do so because they like the cost and/or performance of their investment. Another 12 percent prefer having their assets in a 401k rather than an IRA.
Younger and Older Americans Differ on Retirement
Younger and older Americans also differ when it comes to their understanding of the retirement account rollover process and how much money they have left in previous 401k accounts. Among those who participated in a retirement plan with a previous employer:
- 22 percent of younger Americans (age 18-34) with a 401k or equivalent account at a previous employer that they have not rolled over are "not sure how to transfer or roll over" an old 401k, compared to 10 percent of Americans age 35-44.
- 10 percent of younger Americans (age 18-34) have already forgotten about their old 401k.
- 56 percent of younger Americans (age 18-34) who participated in a 401k or equivalent retirement plan at a previous employer have not rolled over any of their accounts, compared to 40 percent of Americans age 35-44.
Americans closest to retirement (age 55 and older) are leaving the largest amounts of money in previous 401ks, including 29 percent with $50,000 or more in these old accounts.
Three Reasons to Consider a 401k Rollover
Leaving a job sometimes means leaving behind an employer-sponsored retirement account like a 401k or 403(b). While it's tempting to ignore an old 401k or cash out that lump sum, "rolling over" those assets to an IRA or new 401k could be a much better plan for many investors.
Here are three reasons to consider rolling over a 401k now:
- Be Your Own Pilot. Whether retirement is four years or 40 years away, take charge of your retirement investments. An IRA gives you the power to manage and monitor all your retirement investments in one place while tailoring it to your liking. Set up an automatic investment plan to invest a dollar amount that works for you.
- It's Simple. Rolling over a 401k from an old job to an IRA or new 401k simply requires filling out a form and making a few phone calls. Start by setting aside a few minutes and call your former employer. Tell them exactly where you're transferring your retirement plan and once you receive the check, deposit it immediately in your IRA.
- Cashing Out. Resist the urge to cash out. Even if you've only accumulated a small retirement nest egg, the taxes and financial penalties for cashing out are significant. Brace yourself for a 10 percent penalty plus taxes. Even if you have only $10,000 in your 401k, a 10 percent penalty will cost you $1,000. If you have $300,000, a 10 percent penalty would mean $30,000 less for retirement. Consider rolling over the lump sum you've saved for retirement directly to a no fee, no minimum IRA to avoid paying taxes and penalties.
This survey was conducted online within the United States by Harris Interactive on behalf of ING DIRECT's ShareBuilder from August 30 -- September 1, 2010 among 2,207 adults ages 18 and older, 525 of whom have any retirement accounts from a previous employer that have not been rolled over. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. Please contact Corporate Relations at ING DIRECT for a complete survey methodology, including weighting variables.
About ING DIRECT USA
ING DIRECT USA, the nation's largest direct bank and largest thrift, is dedicated to inspiring Americans to become a nation of savers. Since its inception in 2000, more than 7.6 million Americans have entrusted their savings with ING DIRECT, building the bank to $91.3 billion in assets. ING DIRECT has developed a comprehensive social media Savers Community, including Twitter, Facebook and its We, the Savers blog. For more information about ING DIRECT call 1-800-ING-DIRECT, and for information about its commitment to financial education visit Planet Orange.
About ShareBuilder Securities
ShareBuilder Securities Corporation is an online brokerage designed for automatic, long-term investing. The company's vision is to increase the personal investing rate of the average American by helping individuals build and manage wealth over the long term. Customers pay low commissions on individual transactions, have no account minimum and can choose from two pricing programs. ShareBuilder offers investment products including stocks, exchange-traded funds, and mutual funds. ShareBuilder Securities Corporation, a subsidiary of ING Bank, fsb, is a registered broker-dealer and member FINRA/SIPC. For more information about ShareBuilder, please visit Twitter and Facebook.
About Harris Interactive
Harris Interactive is one of the world's leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media, retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through our North American, European, and Asian offices and a network of independent market research firms, Harris specializes in delivering research solutions that help us - and our clients - stay ahead of what's next. For more information, please visit www.harrisinteractive.com.
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