I just discovered tens of thousands of dollars sitting in a forgotten 401(k) — what do I do with it now?

So, what happens if some of it is yours? Let’s pretend, for example, that Jessica has just discovered she has an old 401(k) with over $10,000 in it. Now, Jessica is wondering if she has any other lost accounts and also what she should do with the money she’s stumbled upon.

How can you track down forgotten 401(k) accounts?

Since Jessica already left behind one account, she may very well have made the same mistake when leaving other employers.

According to the Bureau of Labor Statistics, Baby Boomers held an average of 12.9 jobs from ages 18 to 58, and the National Institute on Retirement Security reports that younger workers have similar career habits.

This could, theoretically, mean workers like Jessica end up with a dozen different 401(k) plans, which is too much for most people to manage.

The good news is that if Jessica (or others) are missing past plans, there are resources to find them. Specifically, you can check:

• The Retirement Savings Lost and Found Database: This is administered by the Department of Labor. You can access it by providing your legal name, date of birth and Social Security number. You’ll also need a picture of an active driver’s license.
• Your state’s unclaimed property database: MissingMoney.com has a national database. Input your first and last name and business name to see if you have unclaimed property.
• Use the Pension Benefit Guaranty Corp. search tool: If you worked at a company that ended a retirement plan, this site may have details on the money you’re owed.

Of course, you can also reach out to former employers and former plan administrators, and even former coworkers, to find out if you had a 401(k) plan and to check its status. Jessica should do this to confirm she isn’t missing any more money.

What should you do with the money?

So, what should Jessica do with the 401(k) money she found? Here are a few options.

• Leave it in your former employer’s plan: This is usually an option as long as your old 401(k) has at least $7,000 in it (under the SECURE 2.0 Act, if the balance is below that amount, it may be rolled over to an IRA). This often isn’t a good idea because it may come with higher fees, plus you risk forgetting the money again, and it’s harder to manage accounts.
• Roll it into your current employer’s plan. This makes life more convenient since you can keep all your retirement money together, but since 401(k) plans have more investment limitations, it could give you fewer options.
• Roll it over to a traditional or Roth IRA. This shouldn’t have any tax consequences if you stick with the same type of account. So if you have a traditional 401(k), that means a traditional IRA. This can unlock the door to many more investment options since you can pick whatever brokerage account or financial institution you want to invest with.

Jessica should consider all of these options, but what she definitely shouldn’t do is cash it out, because she’d have to pay a 10% early withdrawal penalty since she’s below 59 ½, plus she’d owe taxes on the distribution. This could bump her up to a higher tax bracket. And she’d miss out on all the future returns the money would have earned.

Jessica and others with unclaimed 401(k)s should think about doing a direct transfer to an IRA to avoid getting a check for the money that must be redeposited into the IRA within 60 days to avoid having the distribution treated as a withdrawal. This approach can provide the most control and flexibility over the money and ensure it isn’t forgotten again.