If you’ve ever tried to roll over a 401k plan, you know the process isn’t exactly seamless.
While much of the financial world has gone digital, 401k plan rollovers are still stuck in the past with paper forms, mailed checks, and weeks-long waits.
401k rollover delays aren’t just frustrating—they can be costly.
New research from PensionBee shows that these delays may cost retirement savers tens of thousands of dollars in long-term growth.
The worst part? The delay often isn’t because of indecision or procrastination—it’s the outdated system itself.
Outdated 401k Plan Rollover Processes
The latest analysis by PensionBee highlights how expensive even short-term absences from the market during a 401k plan rollover can be, especially when markets rebound quickly.
Their study calculated missed growth based on the S&P 500’s performance in late 2023—a time of high volatility—and projected the long-term impact over 30 years with a 7% annual return and a typical 0.85% annual IRA fee.
Here’s what they found for a $100,000 401k plan balance:
2-week delay: $37,512 lost over 30 years
4-week delay: $49,377 lost
8-week delay: $76,882 lost—over 75% of the original balance!
Even though these figures are projections, they show the compounding risk of being out of the market—just briefly—when there’s growth.
For instance, in April 2023, the S&P 500 surged 10.7% in a single day. Missing out on that rally could impact decades of future 401k plan earnings.
Why Do 401k Plan Rollover Delays Happen?
Despite advances in digital banking, many 401k plan rollovers still involve outdated paper-based processes.
Providers often require mailing physical checks, waiting on call center representatives, or dealing with clunky online portals.
Some transfers take weeks, while others can be completely derailed by lost checks, weather delays, or poor communication between old and new 401k plan providers.
As PensionBee’s CEO, Romi Savova, puts it, “This outdated approach isn’t just inconvenient—it has real financial consequences for Americans. Consumers deserve better than a system that forces them to navigate complex paperwork and wait weeks for their money to be reinvested while the clock is ticking on their retirement savings.”
A recent Government Accountability Office survey found that 1 in 4 people trying to complete a 401k plan rollover faced hurdles due to poor communication between providers.
Forgotten 401k Plans Compound the Problem
Leaving your 401k plan with a former employer might seem convenient, but it can expose your money to high fees, limited investment options, and lack of oversight.
Even worse, these forgotten 401k plans might go years without being updated for your current risk tolerance or market conditions.
Here are your options when you leave a job with a 401k plan:
• Leave the funds in your old 401k plan (not ideal unless you qualify for special rules like the 55 and Separated from Service Rule).
• Roll over your 401k plan to an IRA—this can help consolidate multiple accounts and often provides more investment options.
• Roll over the old 401k plan to your new employer’s 401k plan—if they allow it and your balance is at least $5,000.
• Cash out your 401k plan—this usually triggers taxes and penalties, so it’s rarely advisable.
Avoid Costly 401k Plan Rollover Delays
To protect your retirement savings and avoid lost growth:
• Opt for a direct rollover—a trustee-to-trustee transfer that avoids mailing checks and possible tax withholdings.
• Avoid indirect rollovers unless absolutely necessary—they often trigger a 20% withholding and must be reinvested within 60 days to avoid penalties.
• Act quickly—delaying your 401k plan rollover unnecessarily can mean missing out on crucial market gains.
Understand Your 401k Plan Rollover Options
Your 401k plan rollover might not seem urgent, but the impact of missing market growth can have a lasting effect on your retirement.
Understanding your rollover options and getting professional advice can help you avoid costly mistakes and make the best decisions for your 401k plan and long-term financial goals.
