Federal legislation aims to help millions of Americans reconnect with workplace retirement accounts they may have forgotten or “lost.”
DALLAS — Many of us might immediately race out of the office as soon as the clock strikes quitting time. But we might want to make sure we are on track for the ultimate quitting time — when we clock out for good and head to life in retirement.
But a surprisingly high percentage of people reportedly mistakenly think they are on track when they are not. One survey found a staggering 59% of people who were not participating in their workplace retirement plans thought they were participating.
So, they’ve been thinking they’ve been contributing a portion of their paychecks to their retirement when they actually were not.
Auto-enrolling some employees into their workplace retirement plans
In some c ases, costly confusion like that may be avoided now as a new provision kicks in from the Secure 2.0 Act that was passed by Congress two years ago. Starting in 2025, certain employees in certain retirement plans must be automatically enrolled by their employer into their workplace 401(k) or 403(b) plans and a percentage of their paycheck must be directed into their retirement account.
That percentage is to be incrementally increased each year up to a certain point. So, as time goes by, more of their paycheck gets set aside for their retirement.
That sounds helpful, but there are some issues. Again, this only auto-enrolls certain employees and only applies to certain retirement plans. That leaves a lot of potential uncertainty. So, if you aren’t totally sure you are enrolled and contributing to your retirement plan, ask your employer!
Do automatic escalation programs really make workers set aside more for retirement?
Even though some employees will be automatically signed up and their contributions will be automatically increased each year, they can opt-out and get all their pay right now instead of setting aside savings for retirement. And many of them may do that.
A study last year found that even when a worker’s retirement contribution was set to automatically increase each year, the first year the auto-escalation triggered, 57% of employees rejected the increased savings rate.
The next year when another auto increase came around, 64% said it was too much and dialed it back. And by the third year of automatic increases in their retirement savings rate, 71% of workers opted out and kept the extra money in the paycheck instead of putting it into their workplace retirement accounts. I get it — sometimes you think ‘current you’ needs the money more than ‘future you.’ But at least think about this stuff.
Something else to definitely think about: Do you have a ‘lost’ retirement account?
There is another new Secure 2.0 provision that enables you to search to see if you have a “lost” retirement account. That’s actually a thing.
In fact, Capitalize — a firm that helps people locate and roll over those lost retirement savings — estimated in 2023 there were more than 29 million abandoned accounts with $1.65 trillion in combined assets in them. Bankrate has suggestions for how to look for a lost retirement account.
But the Secure 2.0 Act called for a new federal ‘lost and found’ to be established by 2025. They started accepting data from plan administrators and record keepers in November of 2024, and by the end of 2024, the site was launched. You can now search to see if you have a lost pile of retirement money. Note: You must use your Login.gov account or set up one of those logins to confirm your identity and conduct a search. Go here to find out more or conduct a search.
