401(k) Rollovers Are Tedious And Can Take a Few Months, But You May Regret Not Doing One

If you’re trying to roll over your 401(k) and find the process confusing, tedious, and time-consuming, you’re not alone. However, not doing one could hurt your retirement savings.

Roughly 42% of workers surveyed by Capitalize, a fintech company that assists people in rolling over 401(k)s, said that rolling over a 401(k) took them two or more months, while only 22% of the respondents said they were able to complete the process without seeking help.

This is a big hassle for workers, especially with nearly $1.1 trillion set to rollover into individual retirement accounts (IRAs) and 401(k)s this year.

401(k) Rollovers Are Tiresome and Manual

When workers leave their jobs, there are a few things that can happen to their 401(k)s–they can leave the savings in their old employer’s plan, they can be forced out (if it’s a small balance), or they can roll the money over to an IRA or their current workplace retirement plan. 

Typically, to complete the rollover, workers must obtain a check from their old retirement plan provider. That check should be payable to the new IRA custodian, not you, according to Brett Koeppel, founder of Eudaimonia Wealth. 

In the Capitalize survey, a majority (80%) of workers surveyed said they had to make a phone call or fill out paperwork to complete a rollover of their 401(k). More than half of the respondents said they had to do paperwork and 43% said they needed to receive and forward a paper check.

Not Rolling Over 401(k)s Could Be Costly

Even though the rollover process can be cumbersome, experts generally suggest moving your money from the 401(k) of a previous employer.

Workers who don’t roll over the funds run the risk of forgetting about their 401(k) money. An earlier Capitalize report estimated that there were 29.2 million forgotten 401(k) accounts with approximately $1.65 trillion in assets as of May 2023. The most recent survey by Capitalize confirms that more than half of savers (54%) weren’t initially sure where their old retirement account was located.

Koeppel recommends that workers roll over their 401(k) funds to an IRA after they’ve left their previous employer.

“When it’s in a 401(k) or any other employer plan, you can be limited on the types of investments that you have available to you,” Koeppel said. “When you move money into your own [IRA], you just have a lot more control, flexibility, and optionality.”

And savers still have work to do once they’ve rolled their retirement funds into a new IRA—they’ll have to invest them. Not doing so could mean missing out on hundreds or thousands of dollars worth of investment gains. A recent study from Vanguard examining 2015 data found that 28% of workers who rolled over their 401(k)s into IRAs left their savings entirely in cash for more than seven years.