Retirement accounts are often “lost” when people switch jobs, go through a major life change like a divorce, or transition among financial institutions.
“There are more than 24 million ‘forgotten’ 401(k) accounts containing some $1.35 trillion in assets,” according to a report from Capitalize.
The issue is so prevalent that Congress is considering legislation to help resolve the situation. Could you have thousands of “lost” retirement dollars out there? Learn how to track down a forgotten or lost IRA and what to do with the money once you find it.
How to Find a Lost IRA
You may think you’ve “lost” an IRA for good, but it’s almost certainly out there somewhere.
“When an IRA is opened, it is not anticipated that it will someday be forgotten or abandoned. But, as unlikely as that eventuality is, it does happen from time to time,” notes Ascensus, an administrator of retirement plans.
To begin your search for an IRA, visit MissingMoney.com. Forty states participate in this national database. The database supplies information about lost property, including IRAs, that has been turned over to state agencies when their owners can’t be located. You can also check the search tool on the website of the National Association of Unclaimed Property Administrators.
Keep in mind that if a state agency is holding onto your IRA, it’s no longer delivering any returns. That’s because the agency must pull the money out of your IRA and put it into an account that generates no interest income.
In addition, you can:
- Check your federal tax returns. If you received any tax deductions related to an IRA, this would be reflected on previous tax returns, including the name of the financial institution where the IRA was kept.
- Review old bank statements. These statements may help you pinpoint IRA contributions and where they went.
- Reach out to former employers. If you rolled over money from an employer-sponsored 401(k) to an IRA at a previous workplace, contact the former workplace to determine which financial institution held the IRA.
- Contact financial institutions. As you’re looking through financial records, you may come across the names of banks, brokerages, and other financial institutions where you may have opened an IRA. Ask them whether they might have your IRA.
What to Do With an IRA You Discover
Have you hit the jackpot and unearthed a forgotten IRA? Now what? You have several options.
- Take the money. You can typically convert an IRA into cash. However, you may be hit with a tax penalty when you head down the cash-out-your-IRA path, depending on your age.
- Do a rollover. You may be able to roll the old IRA into an employer-sponsored 401(k). This way, you might be able to avoid a tax penalty.
- Leave it alone. In some cases, your best bet might be to keep the IRA where it is and let it continue generating returns.
- Move funds into a self-directed IRA. You may want to consider moving the money from your traditional or Roth IRA into a self-directed IRA. A self-directed IRA enables you to purchase and hold alternative assets like real estate and precious metals.
“No one option is always best for everyone. The key is to understand the pros and cons of each so you can make the right choice for your personal situation,” Forbes advises.
Have you searched for a lost IRA? Did you find one? Contact U.S. Money Reserve to learn about IRA rollovers and how precious metals can work for you in an IRA.