You May Be Leaving Money Behind
If you quit your job in the Great Resignation and had a couple of million dollars in your old company’s retirement plan – you probably remembered to take it with you. However, many people leave money behind when they leave a job.
A report from Capitalize found that workers have left $1.35 trillion in 24.3 million “forgotten” 401(k) accounts as of May 2021.
Losing Potential
Capitalize developed its findings using information from retirement consultants, the U. S. Department of Labor, and the Center for Retirement Research. As a result, it determined that 2.8 million retirement accounts are abandoned each year.
“Leaving behind a forgotten 401(k) account has the potential to cost an individual almost $700,000 in foregone retirement savings over a lifetime,” Capitalize reports.
How Can This Happen
It may be easier to forget money in a 401(k) than you think. That is especially true if you have changed jobs several times, according to Anna-Marie Tabor, director and managing attorney of the Pension Action Center (PAC).
“All sorts of changes happen,” Tabor told Rethinking 65. “Over time there is more opportunity for these changes to occur.”
Companies can merge with other companies. They can go out of business or file for bankruptcy. Data can get fouled up. In addition, an employee may not notify the company’s plan of a change of address.
Charges Are Not Forgotten
Fees continue to be charged to administer your old company’s retirement plan – even if you have forgotten about the plan. In addition, if your plan invests in a mutual fund or ETFs, there are usually fees and those keep being assessed to your account.
Your Options
You have several options for managing money in a company plan when you leave your job. Those include:
- Rolling funds from the company plan to an IRA.
- Moving the money to your new company’s retirement plan.
- Cashing out. Here, you pay fees and taxes and take the money. However, this tactic defeats the purpose of saving money in a tax-deferred plan.
The Money Can Be Retrieved
You can still get the money you may have in a retirement plan from an old job.
The most obvious way to get money from a previous employer-sponsored plan is to contact the plan administrator, the human resources department at your old job should be able to help with that.
There are several other resources, such as:
- The Department of Labor’s abandoned plan database.
- The Pension Benefit Guaranty Corporation’s trusteed plan search.
- The National Association of Unclaimed Property Administrators operates unclaimed.org.
Yield on 10-Year Treasury Bond Drops
In times of high inflation, many investors move money from growth and more volitale investments into guaranteed investments — Treasury bonds. However, the Russian invasion of Ukraine has put a drag on Treasury Bond yields.
The yield on 10-year Treasury Bonds hit a six-week low a few days ago as investors at home and abroad began buying. Many foreign investors have turned to Treasury bonds in a flight to safety in the wake of Russia’s aggression.
Invasion Sparks Slide
The yield on 10-year Treasury Bonds stood at two percent the day before Russia launched its invasion. Since then, the yield has fallen dramatically. By Friday it had reached 1.729 percent.
Russian President Vladimir Putin has found his invasion of Ukraine to be a slow slog rather than the blitzkrieg he apparently expected. Ukrainian forces, many of them volunteers, have put up stiff resistance.
However, the Russians captured a nuclear power plant in Southern Ukraine Friday. That news has put further downward pressure on treasury yields.
Positive Jobs Report
A good jobs report often bodes well for treasury yields. However, February’s jobs report had no effect.
The country added 678,000 jobs last month, according to the Bureau of Labor Statistics. As a result, the unemployment rate slipped from four percent to 3.8 percent. In addition, employee pay is rising at the fastest rate in three decades.
Interest Rate Hikes
Events in Ukraine are on everyone’s radar. However, they do not seem to be altering plans for the Federal Reserve to raise interest rates.
Testifying before Congress this week, Fed Chair Jerome Powell said he intends to push for a rate hike at the Fed’s next meeting. That will take place on March 16. It is expected to be the first of several hikes this year.
Why It Matters
The 10-year yield on treasuries is an indicator of where mortgages are headed (see below). A falling yield usually indicates lower mortgage rates.
In addition, many analysts see a falling 10-year yield as an indication that investors are seeking safe investments.
Meanwhile, economists fret as the spread between 10 and two-year yields narrows. Conventional wisdom says that if that spread reaches zero, we are in a recession. As it is, the gap between 10 and two-year yields has shrunk. However, yields on two-year bonds are also in decline.
Mortgage Rates Trending Lower For Now
Mortgage rates are expected to rise this year. However, the interest on 30-year fixed rates mortgages is in decline.
Mortgage rates fluctuate and could turn higher at any moment.
30-Year Mortgage
The average rate for a 30-year mortgage was 4.21 percent Friday morning. That is down from 4.25 percent last week, according to Bank Rate.
Conversely, the rate for 15-year mortgages is up. It rose .03 percent in the last week to 3.5 percent Friday.
Other mortgages are following the 30-year rate. As a result, adjustable rates are 2.93 percent and jumbo rates are 4.22 percent. Those rates have declined .01 and .03 percent respectively in the last week.
Recent Change
Some of the volatility in current mortgage rates is due to the conflict in Ukraine.
Investors have rushed to the safety of U. S. Treasury Bonds (see above) amidst the Russian war. As a result, yields on Treasuries have declined. In turn, that has pushed mortgage rates down.
“While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty,” Sam Khater, Freddie Mac’s chief economist told CNN. “Consequently, rates are expected to stay low in the short-term, but will likely increase in the coming months.”
What’s Next
The downward trend in mortgage rates is expected to be short-lived.
Inflation continues to rise and will take bond and mortgage rates with it sooner rather than later.
“Market volatility and rising oil prices are likely to push bond yields into larger swings, while inflation will keep upward pressure on mortgage rates,” says George Ratiu, Realtor.com’s manager of economic research.
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
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