This year has offered its fair share of challenges for financial markets and global economies. The R-word has been a constant in the minds of employers and employees alike; not recession but resignation. In what is being dubbed the ‘great resignation,’ employers have faced a historically tight labor market, rising wages, and the need to offer competitive benefits. While the ‘great resignation’ phenomenon has certainly played its part in the macro picture, there is an impact that is going largely unnoticed. Those who are leaving their employers may be hurting themselves when it comes to their retirement.

As individuals navigate complex variables when choosing one employer over another, they typically aren’t thinking about their existing retirement savings as part of the equation. Based on a study by Economist John Sabelhaus of the Wharton School of the University of Pennsylvania, 53.3% of all employers now offer a retirement savings benefit. The majority of the time someone comes into a role, the idea of saving for retirement is figured out for them, technically. Most workers hold an average of 12 positions in their adulthood. What happens with their previous retirement savings is where things go awry.

The Cost of Inactivity

Research conducted by Fintech firm Capitalize, with data gathered by the US Department of Labor, the Census Bureau, 401(k) record-keepers, and the Center for Retirement Research at Boston College, aimed to estimate accounts left behind by employees. The firm estimates that there were 24.3 million forgotten 401(k) accounts in 2021, and these accounts held an average balance of $55,400. Given how stressful job transition can be, it comes as no surprise that someone would choose to leave their savings in their previous plan. Estimates could move higher given the current climate where one in five workers say they are likely to switch to a new employer in the next 12 months.

Without context, this inactivity seems pretty benign, but the costs of not staying on top of your retirement accounts could potentially be in the hundreds of thousands. The cost of plans’ individual investment fees, and asset management fees tend to be higher than most IRAs, potentially eating away at returns and compound interest. In addition, due to the self-guided nature of employer-sponsored retirement plans, some participants will have an asset allocation unsuitable for their savings goals. For instance, the spread between general market returns and a money market/stable fund investment is significant, and when you factor in compounding, potential returns lost are exponential.

Thankfully the problem of forgotten accounts has gotten attention, as legislators move to pass what is termed SECURE 2.0. The legislation currently being discussed in the Senate has widespread support for creating a national database to help individuals locate previous retirement accounts. There are also discussions regarding changing investment elections to target date funds for participants who cannot be located. These same individuals with smaller balances would have those transferred to either the treasury or the Pension Benefit Guaranty Corporation (PBGC). The proposed legislation will have an impact in curbing the problem; until then, the burden falls on plan sponsors, administrators, and participants to be fully aware of options and offer streamlined processes for account rollovers.


Sabelhaus, J. 2022. The Current State of US Workplace Retirement. WP2022-07.

“Survey of over 52,000 workers indicates the Great Resignation is set to continue as pressure on pay mounts.” PWC, PWC, 07/20/2020.

Capitalize. 2021. The true cost of forgotten 401(k) accounts.

Warren, E. “2021 Warren and Daines Reintroduce Bipartisan Bill to Upgrade America’s Retirement Saving System” US Senate Newsroom, 07/20/2022.