A 401(k) retirement account is supposed to be hands-off. It’s not your money, in theory, but savings for the future you.
And yet, when Americans leave jobs, one-third of them cash out their 401(k) accounts.
That’s called 401(k) “leakage,” and it costs workers untold billions of dollars in lost retirement savings.
In a recent paper, Vanguard ponders why so many Americans liquidate retirement accounts when they exit jobs – about 33%, by their estimate -- and what employers and employees can do about it.
The 401(k) was designed to help American workers build retirement savings, using tax breaks as an incentive.
