Small 401k Balances Keep Eroding After Job Changes, New Research Shows
New research from PensionBee found that 68 percent of automatic rollover IRAs lose value within a year, creating what analysts call a potential $43 billion 'junk IRA' problem by 2030. The study found that 94 percent of small 401k balances processed through portability networks remain stuck in interim safe-harbor IRAs where fees eat away at savings.
Workers who change jobs and leave behind small 401k balances are losing money at an alarming rate, according to new research published November 2, 2026, in Investment News.
Data from PensionBee shows that 68 percent of automatic rollover IRAs, accounts that hold small 401k balances after a job change, lose value within a year. Analysts warn this could create a $43 billion "junk IRA" problem by 2030.
The research found that 94 percent of balances processed through auto-portability networks remain stuck in interim safe-harbor IRAs, where fees steadily erode the savings. These accounts are meant to be temporary, but many workers never move the money to a new employer plan or roll it into a personal IRA.
Auto-portability is a system designed to automatically move small 401k balances when workers change jobs, keeping retirement savings intact. But the research suggests the system is not working as intended for most participants.
The problem hits lower-income workers hardest. Small balances, often under $5,000, are most likely to be cashed out or left behind when workers leave a job. Cashing out triggers taxes and penalties, while leaving the money behind exposes it to fee erosion.
Financial advisors say workers should actively track their retirement accounts after every job change and consolidate balances into a current employer plan or a personal IRA as soon as possible.
The Department of Labor has been working on rules to improve retirement plan portability, but critics say the current framework still leaves too many small balances vulnerable to erosion and abandonment.
