Reema goes on a hunt to find her long-forgotten retirement accounts from early in her career.
Hey Smarties! There won’t be a livestream for “Economics on Tap” today. But don’t worry! We’ll be back next week. For now, we’re sharing an episode from our friends over at “This Is Uncomfortable.” Enjoy!
What happens to your retirement savings when you leave a job? And if you’ve forgotten a 401(k) account for years, how do you track that money down? That’s the mystery host Reema Khrais is trying to solve this week, as she faces her own financial anxiety to locate abandoned retirement accounts from her previous employers.
Khrais talks to Geoffrey Sanzenbacher, an expert on retirement research, who reassured her that she’s not alone in her struggles: only about 15% of people actually roll over their retirement balances to a new employer's plan when switching jobs. Even he had trouble helping a family member do this tricky task!
What are your options for dealing with old retirement plans?
Roll it over: You can roll over the balance to your new employer's plan. Sanzenbacher says that’s probably the best option, if only to simplify matters and keep all your money in one place.
Leave it (but don’t forget it): You can leave your balance in the previous employer’s plan, where it may continue to grow, but you cannot contribute more and there’s a chance they may start charging you fees. Sanzenbacher describes this as “not a terrible option.”
Switch it: Or you can roll over your balance to an IRA instead, but Sanzenbacher warns that IRAs typically have higher fees than a 401(k).
Cash out: Lastly, you could cash out, but Sanzenbacher warns this is the worst option if you’re trying to build your retirement nest egg, because you forfeit any potential growth in the future.
Reema also speaks with behavioral economist Katy Milkman to figure out why this kind of financial chore feels so hard. “Our operating system as humans is built to procrastinate on things that are not instantly gratifying,” Milkman explains. “It doesn't mean there's something wrong with you specifically, right? It's something that's wrong with the way we were all designed, but it could become a problem for you specifically. And so you've gotta outsmart your operating system and figure out a workaround that's gonna get you where you wanna be.” Milkman shares some brain hacks to help you get through that daunting to-do list.
Strategies from the experts for tackling chores you keep putting off:
Schedule your future self: Add it to the calendar and tell a friend who can hold you accountable.
Make it hurt (financially): Set up a system where you’ll have to donate money to a cause you hate if you don’t meet your deadlines.
Reward yourself: You only get this treat once you’re done!
Don’t do it alone: Do the thing that you've been putting off, but with a friend, so there’s built in fun and accountability. Milkman suggests: “If you have a friend who is in the same boat, you can say: ‘You know what? We're gonna set aside two hours next Saturday with a nice bottle of wine at the end, and we're gonna sit next to each other on the couch with our laptops to get this done.’”
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