When starting a new job, many new hires often overlook important documents, including retirement plan paperwork. But as retirement plans grow increasingly complex, it's easy to miss essential details — particularly the fees that could impact your savings.
A recent report from the U.S. Government Accountability Office found that nearly half — 41% — of American workers are unaware that 401(k)s carry fees. While most of these fees are administrative or service-related and relatively low, those who leave behind a 401(k) from a previous employer may find themselves facing additional maintenance fees.
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"If your old employer was paying your retirement account fees for you while you were employed, they might stop when you move on from that job," said Romi Savova, CEO of PensionBee, a retirement consolidation and management platform. "And that can leave your old retirement account exposed to fees that you might not be aware of at all."
Research by PensionBee shows that a modest monthly fee of $4.55 can lead to nearly $18,000 in lost retirement funds over time due to the compounded growth you won’t see on your principal.
"Unless you know exactly where to go looking for this information, just because it's disclosed somewhere doesn't mean that you are likely to know it," Savova cautioned.
A report from Vanguard last year highlighted that nearly half of employees leave money in their old plans when changing jobs, often without realizing the implications.
So, what can you do if you find yourself in this situation? You may have a few options.
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You can roll your funds into a new employer-sponsored plan or transfer them into an Individual Retirement Account (IRA). While IRAs may have higher investment fees, being aware of your plan's details is crucial.
Cashing out is another option, but it's generally not recommended due to hefty tax penalties and the loss of potential long-term gains.
"While the lure of money today might seem appetizing, you should think about future you," Savova advised.
Understanding your retirement options can empower you to make informed financial decisions that benefit you in the long run.
This story was initially reported by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
