Industry Demonstrates Need for Better Retirement Savings Rollover Support for Job Changers

Retirement savers invest their earnings in hope of a secure future, but a job change—even for higher pay—may threaten their progress.

As employees move to new jobs, savings from the job they leave risk drifting away, according to Empower’s “The Retirement Drift” study, published this month.

According to the study, based on a survey conducted in July and August among 2,005 U.S. adults, 84% of respondents said they changed employers at least once during their careers, 53% changed three or more times and 27% made at least five moves. Meanwhile, 39% of respondents said they had retirement savings spread across accounts from different employers, and 54% said that made it harder for them to plan for retirement.

The “drift” issue, though existent among all generations, emerged prominently in younger Americans’ careers. Half of Generation Z respondents and 45% of Millennials said they may have had retirement savings from a previous employer that they had lost track of, compared with 30% of Generation X and 14% of Baby Boomers. At the same time, 57% of Gen Z and 45% of Millennial respondents said they were not confident they could locate all their retirement savings today.

When asked about solutions to the drift away from retirement accounts, about three-quarters (76%) of respondents said “clear, step-by-step guidance” would make them more likely to keep their retirement savings organized, and 70%, in response to a separate question, said they would be more likely to combine their old retirement accounts if the process of doing so took less time. Separately, another 70% of respondents said a better understanding of their retirement income options would make them more likely to stay organized.

Sixty-six percent of respondents reported wishing someone had explained their retirement savings options when they changed jobs, and 54% said they were unaware they had several options for managing their savings after leaving their employer, such as rolling it over into their new employer’s 401(k).

In addition, 47% of respondents reported having delayed dealing with retirement savings—including initiating a rollover—because doing so “felt overwhelming.”

Left-Behind IRAs

According to a PensionBee whitepaper, also released this month, employers move nearly 2 million left-behind retirement accounts with balances of less than $7,000 out of 401(k) plans and into automatic rollover individual retirement accounts each year. The firm estimated that by 2030, approximately 13 million accounts holding $43 billion will sit in automatic rollover IRAs.

While assets are intended to remain in an automatic rollover IRA for between only 30 and 60 days, PensionBee found 87% of the accounts were still there after one year, and 52% of the accounts were still there after eight years. Meanwhile, nearly 68% of accounts decreased in value after the first year, which PensionBee’s paper stated was likely due to high opening fees on the rollover IRAs. Of the accounts still there in year eight, nearly 40% were worth less than when they arrived, again attributable to high fees and cash investments that earn well below the rate of inflation.

Vanguard published research in September on the effectiveness of the Portability Services Network, a private solution for consolidating even smaller retirement balances as workers change jobs. Defined contribution retirement accounts with balances of less than $1,000 can be automatically cashed out when a participant leaves the plan.

The firm’s paper stated that analysis of PSN-adopting plans found that auto portability through PSN significantly cut cashout rates for balances of less than $1,000 from about 50% to approximately 9%. PSN was launched in October 2022 by a consortium of recordkeepers and the financial services company Retirement Clearinghouse.

The researchers at Vanguard, Fiona Greig, Kelly Hahn and Fu Tan, found that while the reduction of cashouts among PSN-adopting plans was notable, 94% of the accounts moved to PSN had not been matched to a participant’s new employer-sponsored retirement account. The study cited low adoption of PSN by employers as a reason for the high-level of unmatched accounts.

In an interview, Grieg said more digital account rollovers and solving for accounts with larger balances are also necessary.

She points to the Australian system as one that could be a model for the U.S.

The country’s superannuation system uses “a standard set of plumbing” that in 2025 resulted in 80% of Australians having a single retirement account.

Regulatory Efforts

The Department of Treasury and IRS in August proposed a new process intended to make it easier for Americans to move their retirement savings from one plan to another. Public comments closed on October 23 and largely included suggestions for improvement from key industry groups.

IRS Notice 2026-49 proposes a five-step process and sample forms to standardize direct plan-to-plan rollovers and rollovers to IRAs from employer plans. Congress required Treasury to simplify the process as part of the SECURE 2.0 Act of 2022.  Under the proposal, retirement plans would communicate more directly with one another instead of relying on participants to manage much of the process of moving an account themselves.

Plan sponsors would be encouraged to use encrypted communications, a unique identification number for each rollover, and electronic fund transfers for moving assets whenever possible. The changes are aimed in part at reducing the use of paper checks. If an electronic transfer is not available, the proposal calls for a check to be made payable to the receiving plan and sent directly there, rather than to the participant.

The ERISA Industry Committee, in its comment letter, recommended the IRS focus on reducing the number of steps involved in the rollover process, protecting plans that follow the process and encouraging electronic transfers over paper checks.

Betterment LLC recommended coordinating industry participation through synced federal rules, setting deadlines for rollover completion time and making digital transfers the standard, among other practices.

The IRS will now review comments before issuing final guidance.