Starting a new job can be an exciting opportunity to potentially make more money, but for some Americans, they could be walking away from serious cash that’s tied to their old jobs.
Take Anni Morita, for example. Morita, a 29-year-old from Rochester, is one of a growing number of Americans who have been impacted by an involuntary rollover of their 401(k) after leaving a company.
As she explained to the Wall Street Journal, Morita received a notification in 2021 from her former employer that her 401(k) was being rolled over into an IRA (1). When she failed to make a decision about her IRA for the next few years, she eventually discovered the balance had actually declined in her investment account.
“I felt duped,” she said. “It feels disrespectful of people’s futures that the balance would decrease over time instead of increase.”
Unfortunately, Morita’s story is fairly common; under a relatively new law, employers can now unload 401(k) accounts that belonged to former employees. For balances below $1,000, employers can send a check to former workers. But for accounts between $1,000 and $7,000, employers can make involuntary transfers to IRAs, where the money will not gain much interest, if any at all.
Here’s what you need to know about involuntary rollovers, and how you can protect your investment when leaving a company.
This change in the law generally impacts those with low 401(k) balances. Under the new law, people with balances of $7,000 or more can stay in a former employer’s 401(k) plan.
But for those who don’t have at least $7,000 in a 401(k) when leaving a company, having a former employer transfer the money out of the account and into a safe harbor IRA can be costly.
“Safe harbor IRAs, which must notify owners that they hold the money, can hold back wealth building,” the WSJ reports. “Take someone with $4,500 in a safe harbor IRA earning a 2% annual return. Four decades later, the person would have $10,130. By instead investing in a portfolio of stocks and bonds that earns 5% a year, the person would have $33,260.”
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In total, Americans have about $28 billion parked in safe harbor IRAs — a specific kind of IRA that employers use for involuntary 401(k) rollovers — and that total could rise to $43 billion by 2030, according to the Employee Benefit Research Institute (1). Furthermore, EBRI reports that more than three-quarters of workers still have their money in an IRA three years after leaving their former employer.
From the employer’s perspective, a large number of small balance 401(k) accounts can cause administrative issues and increase their plan costs (2). However, the WSJ report indicates that many Americans are being impacted by this administrative clean-up effort. In 2025 alone, employers transferred an estimated 1.7 million from 401(k) accounts into safe harbor IRAs, and that total is projected to rise to 2.2 million by 2030.
For workers, forgetting to reinvest your 401(k) balance or simply cashing out the account can have major consequences down the line — especially for the next generation of retirees, which appears to be woefully unprepared for retirement, according to a CNBC report (3).
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For those who have a 401(k) with their current employer, it’s important not to forget about these accounts when they leave the company, as doing so can wind up costing you money down the road.
Some workers may be OK with their 401(k) rolling over into an IRA when they leave a company, but for those who prefer that this money remains in an account that earns decent compound interest, reinvesting the funds as soon as you leave that company is critical.
When an employer rolls over your 401(k) into a safe harbor IRA, they are required to notify you, and the holder of your new IRA is also required to provide you with information about your new account.
If you are unsure of the status of a 401(k) account with a previous employer, you can try to contact said former employer, or the holder of the 401(k) plan, to check in on the status of the account. If you don’t have luck with that, there are also online databases you can use to search for your old accounts, including The National Registry of Unclaimed Retirement Benefits, and the Employee Benefits Security Administration’s abandoned plan database.
Once you gain access to an old retirement account, you can merge the balance into your current IRA or 401(k).
Unfortunately, it can be easy to forget about a 401(k) when starting a new job. In fact, Capitalize estimates that as of July 2025, Americans had collectively forgotten about 31.9 million 401(k) accounts, which are believed to hold up to $2.1 trillion in assets (4).
That’s a lot of money in forgotten accounts, and if you want to prevent yourself from adding to these numbers, be sure to take care of your 401(k) as you’re preparing to leave one company for another.
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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Wall Street Journal (1); Retirement Clearinghouse (2); CNBC (3); Capitalize (4).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
