RCH Consolidation Corner Channel Ep. 21 - Portablity: The Real Story of 'Forgotten' 401(k) Accounts

NARRATOR:
If you’re part of the retirement ecosystem, you probably saw the headlines in early October 2025: nearly 32 million “forgotten” 401(k) accounts holding more than two trillion dollars in assets. It’s a shocking number, and it made big waves across retirement industry media.

But after that initial buzz, two industry thought leaders, Nevin Adams and Paul Mulholland, took a closer look. Both questioned the study’s methods and its sweeping claim that these accounts were truly “forgotten.”

Mulholland offered a sharper perspective: these numbers really highlight a lack of efficient portability in our retirement system -- not a memory problem. And we couldn’t agree more. In fact, we at Retirement Clearinghouse took the same position back in 2021 when the first “forgotten accounts” analysis came out.

So, let’s set the record straight. If the real issue is portability -- the ability to move savings smoothly from plan to plan, then what’s getting in the way, and how do we fix it?

One thing is for sure – there’s already a good deal of 401(k)-to-IRA portability. Each year, roughly $1 trillion moves out of 401(k) plans and into IRAs. According to Cerulli, about two-thirds of those rollovers are guided by financial advisors, typically working with balances above $200,000.

Now compare that to the much smaller flow of roll-ins -- money moving into active workplace plans. In 2022, that number was only around $72 billion. That’s a 14-to-1 imbalance. In other words, the 401(k) system moves money out reasonably efficiently -- but struggles to move it within the 401(k) system.

There is progress on one front: auto portability. This technology automatically transfers smaller balances -- those under $7,000 -- when workers change jobs. Once fully implemented, it could generate about $12 billion a year in new roll-ins.

That’s an important step. But what about larger balances? Many participants intentionally leave their money in a former employer’s plan, especially if it’s well-managed and low-cost. That’s fine, and it’s far better than cashing out. But for those who want to consolidate, the process is often manual, outdated, and unnecessarily difficult. As a case in point, let’s examine the “do-it-yourself” roll-in -- and if you’ve ever tried it, you know the pain. You fill out confusing forms, make endless calls, and hope everything lines up between recordkeepers. It’s slow, stressful, and rarely worth the hassle.

And the real cost? Time. On average, a participant spends about nine hours completing a roll-in. If we value that time at roughly $240 an hour, that’s a $2,000 “cost” per person -- or nearly $69 billion systemwide. That alone explains why DIY roll-ins haven’t caught on.

A better approach is the assisted roll-in. Here, participants work with a specialist who uses workflow tools and expertise to guide them through the process. It’s faster, smoother, and more accurate -- reducing personal time from nine hours to about one.

But it comes with a real dollar price tag: around $70 per transaction. If everyone used assisted roll-ins, consolidating all those “forgotten” accounts would still cost nearly $10 billion. It’s a huge improvement, but it’s not a scalable solution, as it only masks systemic inefficiencies.

That brings us to the real breakthrough: automatic transfers. Think of it as auto portability, but for all balances. With automatic transfers, recordkeepers would follow shared standards for secure data exchange and electronic transfers. Participants could give consent digitally, identify their old accounts, and track the process from start to finish. It could even extend to IRAs, as long as the receiving provider participates in the network.

And the cost? About $30 per account -- less than one-tenth the cost of assisted roll-ins. Consolidating all 31.9 million accounts would cost under $1 billion systemwide. That’s not just efficient -- it’s transformative.

Here’s what this all means:

First, not every left-behind account is “forgotten.” Many people are perfectly content leaving their savings where they are.

Second, when participants do want to consolidate, the current system makes it unnecessarily difficult.

And third, of all the solutions on the table -- DIY, assisted, or automatic -- only automatic transfers truly fix the problem at scale.

An affirmative-consent, industry-supported automatic transfer network would make consolidation simple, secure, and cost-effective for everyone -- participants, plans, and providers alike. Because ultimately, this isn’t about forgotten accounts. It’s about fixing the system -- so that saving and staying on track for retirement becomes seamless, not stressful.