Typical Retirement Account Balances

Rules have changed over the years but a $6,000 400(k) will likely be forced out to a rollover IRA, which will probably be invested in a money market as the force out limit increased from 5k to 7k on 1/1/24 as part of SECURE 2.0.

I’d encourage your spouse/SO to track down the 401(k) and transfer it to an IRA even you need to jump through some hoops to do it.

Transfers to unclaimed property may still happen but I think they are rare.

A plan can’t distribute without consent if the vested balance is more than 7k unless the participant reaches the later of age 62 or the Plan’s normal retirement age, another exception may apply if the Plan is terminated and the participant is lost or non-responsive in which case they will most likely be forced out to an IRA or have their funds transferred to the PBGC program that’s a few years old and takes funds from terminated DC plan now in addition to covered DB plans. It’s also possible the plan has annuity option and an annuity might be purchased when the participant reaches NRA but this is somewhat rare I think for 401k plans and much more likely in a DB plan.

I think the only case where it might be transferred to unclaimed state property is if the participant is sent a check at NRA and it goes uncashed, at that point it might get transferred to unclaimed property.

There is a reporting database though SSA where terminated participants in retirement plans with a deferred benefit are reported and when you apply for social security if your in the database you get a letter that says “you may be entitled to a benefit from the XYZ Plan”. This can be hit or miss as plans are required to report but not required to remove so a lot of people who have long since been paid from the plan get the letter and forgot they were paid out. Oh and even if the plan removes you that’s hit or miss whether the SSA also removes you, especially on older forms that were paper and not filed electronically. That’s always fun. It’s good when the plan has the records showing the distribution but sometimes that’s 30 years old and records may or may not still be around.

Then there is M&A and Plan terminations where lost missing participants are always fun project.

Moral of the story, when you leave a company, consolidate you retirement account into an IRA as soon as you can when you can.

1 Like

I think it is state by state but generally if you don’t access an account for 3 years the funds are sold off and the cash is sent somewhere for “safe keeping”

If it’s been 6 years and there are no records of this missing 401k then your partner’s employer most likely cashed out that $3k and sent her a check when employment was terminated

But 401(k) plans don’t fall under State Law for most things, they are Federal Law and governed by ERISA.

That said, the $3K may have already been sent to an IRA in her name (plans can no longer just send you a check if your balance is more than $1000) and it’s a matter of tracking down that IRA. Now that IRA may have later been transferred to state unclaimed property.

2 Likes

It’s not currently unclaimed property. Maybe I’ll try to go through this website and open them an IRA tonight, see if we can’t get it found.

They mention that low income folks (making under $22,000 a year) don’t save much. I’m not sure how big a problem that is due to the Social Security bend points.

If you were making $18,000 a year pre-retirement that’s $1,500 a month. Your Social Security benefit would be $1,160.90 a month or $13,930.80 a year, which is 77% of your pre-retirement income. It wouldn’t take a lot of retirement savings to get that even closer to 100%.

People making less than that would have an even greater share of their pre-retirement income replaced by Social Security. If you make $14,088 or less you’ll have 90% replaced by Social Security.

By contrast if you’re rich and make at least the wage base for 35 years the benefit maxes out at around 28% of the wage base (a lower percentage of total income).

1 Like

Yep, then on top of that people making less than federal poverty level will qualify for Medicaid, food stamps, section 8 housing waivers, free internet, free phone, free bus passes

This is why America is not overrun with poor retirees walking around in rags and living in tents

America does a decent job taking care of their own (who put in 35 years worth of work)

1 Like