Updated October 21, 2026, 12 p.m. ET
A 401(k) plan is meant to grow exponentially in value over time, thanks to the miracle of compounding. This growth is key to the promise of financing a comfortable retirement.
But if you quit a job and leave behind a four-figure 401(k) account, that growth might never happen.
Billions of dollars are deposited into “auto-renewing” individual retirement accounts, created when a worker leaves the company, and the employer removes their 401(k) from their workplace retirement plan.
The value of a typical 401(k) account multiplies over the years as the stock market rises. But that’s not the case with an auto-rollover IRA: Typically, the money ends up in a cash equivalent account, where it can earn 1% or 2% interest per year. Administrative fees decrease the value of the account.
A new white paper released Oct. 21 by retirement savings provider PensionBee shows what happens to these accounts over time: nothing good.
After a year, the study found, 68% of auto-rollover IRAs had lost value. After eight years, 39% of accounts are still worth less than when they were created.
“Millions of Americans have small 401(k)s at former employers, and most have no idea that money can be moved into an account that is slowly draining their savings,” said Romi Savova, CEO of PensionBee.
401(k) accounts are meant to grow, not shrink
A retirement account of decreasing value goes against the design of the 401(k) system: the idea is that American workers build retirement nest eggs over decades of compounded value by investing in the stock and bond markets, not letting the money languish in a low-interest money market account.
“You want that money to grow and be invested in a way that you can enjoy those returns,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute. The PensionBee report is based on EBRI account data.
Automatic rollovers are becoming more common, with the gradual expansion of tax-advantaged retirement accounts and the rise of automated new worker enrollment.
The number of automatic refinances is expected to double from 1.1 million per year in 2022 to 2.2 million per year in 2030, according to a study by PensionBee and EBRI. By then, 13 million accounts holding $43 billion in retirement assets could remain in IRA purgatory.
Congress created “Safe Harbor IRAs” in 2001 to allow employers to preserve the retirement funds of deceased workers. This was a good thing, if the alternative was to close the account and write a check to the former worker, thereby triggering taxes and penalties.
The law applied to balances below $5,000, a threshold later raised to $7,000. Employers could create rollover accounts without the worker’s consent, but had to keep the funds in a cash-equivalent investment – in theory, to preserve value.
Safe Harbor IRAs were intended to be temporary. But half of all rollover IRAs are still open eight years later, PensionBee found. Workers lose track of accounts or forget they existed.
Over time, auto-rollover IRAs often lose value due to a combination of low interest rates and administrative fees. The account provider may charge a one-time fee of $100 to open the account and a fee of $5 for monthly maintenance in perpetuity. Fees eat into account value, especially when the starting balance is low.
“A dollar fee of $30 or $50 a year, which can be very toxic for a small account,” Savova said. “There is no way the return on this account will exceed the fees.”
More than $2 Trillion Sits in Forgotten or Left Behind Retirement Accounts
Automatic refinances are part of a larger problem: According to industry estimates, more than $2 trillion is sitting in forgotten or left behind retirement accounts.
When you leave a job and have a 401(k), you have several options. You can rollover yourself, moving the funds to another 401(k) or IRA. You can cash out, potentially triggering taxes and penalties. Or you can’t do anything.
If you do nothing and the 401(k) has $7,000 or less, there’s a good chance your employer will do an automatic rollover.
These low-interest accounts typically belong to younger workers, often under the age of 45, who tend to change jobs and addresses more frequently. With a job change and a move, it’s easy to imagine how a retirement account could get lost in the shuffle.
“Maybe you were automatically enrolled in a 401(k), so maybe you weren’t paying attention to it at first,” said Kate Ashford, senior wealth management editor at personal finance site NerdWallet. “You change jobs. There’s a lot going on. It’s not on your priority list, and the longer you wait, the lower it goes on your priority list, so it stays there.”
Do you have money in an automatic rollover IRA?
You might have money in an auto-rollover IRA, PensionBee advises, if any of these statements apply to you:
- You left a job in the last few years and haven’t claimed your 401(k).
- Your account balance was less than $7,000.
- You have since moved or changed your email address.
- You received mail from an unknown IRA provider.
If you think you’ve lost track of an old 401(k), here are some places to look:
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