New Data Reveals the Shocking Cost of 401(k) Rollover Delays

June

New Data Reveals the Shocking Cost of 401(k) Rollover Delays

June 9, 2025

If you’ve ever tried to roll over a 401(k), you know the process isn’t exactly seamless.

While much of the financial world has gone digital, rollovers are typically still stuck in the past with printed forms, mailed checks, and weeks-long waits.

This isn’t just frustrating.

According to new research from PensionBee, it may be costing retirement savers tens of thousands of dollars in long-term growth.

And the worst part?

The delay isn’t always because of indecision or procrastination –it’s often the system itself.

Outdated Rollover Processes

401(k) rollover delays

The latest analysis by PensionBee highlights just how costly short-term market absences during a rollover may become, especially when those absences coincide with market rebounds.

The out-of-market returns were calculated according to historical S&P performance for late 2023 – a period of high volatility. Long-term impact was calculated over 30 years with a 7% annual return and a standard 0.85% annual IRA fee.

Their study modeled missed investment growth for rollovers delayed by just 2, 4, and 8 weeks.

The findings? Eye-opening.

According to the data:

A 2-week delay with a $100,000 balance may cost you $37,512 over 30 years.
A 4-week delay with the same balance could lead to $49,377 in missed returns.
An 8-week delay with a $100,000 balance? Up to $76,882 lost – over 75% of the original balance.¹

While these figures are projections, they illustrate the compounding risk of being out of the market – even briefly – during periods of growth.

For example, in April 2023, the S&P 500 rebounded 10.7% in a single day.²

Missing that type of rally could ripple across decades of future earnings.

Why These Delays Happen

401(k) rollover delays

Despite living in a digital-first world, most 401(k) rollovers still involve outdated, paper-based processes.

Many providers require mailing physical checks, dealing with call centers, or navigating clunky online portals.

Some transfers take weeks, while others may be derailed entirely by lost checks, weather delays, or poor communication between providers.

As PensionBee’s CEO, Romi Savova, put it, “This outdated approach isn’t just inconvenient, it has real financial consequences for Americans.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, all while the clock is ticking on their retirement savings.”³

A recent Government Accountability Office survey even found that 1 in 4 people attempting a rollover faced hurdles “due to poor communication between old and new providers.”⁴

Forgotten 401(k)s Compound the Problem

401(k) rollover delays

Leaving your 401(k) with a past employer may expose your money to high fees, limited investment options, and a lack of active oversight.

Even worse, forgotten accounts may go years without being adjusted for your current risk tolerance or market conditions.

Here are the options on what you can do with your 401(k) when you leave a job:

Leave the money behind in your former employer’s 401(k) plan. You don’t have to, but you can (and we’d advise against this option unless you qualify for the 55 and Separated from Service Rule).
Roll over your 401(k) into an individual retirement account (IRA). This option has many advantages, including consolidating more than one 401(k) account into an IRA. This works well for those with a string of old 401(k) accounts.
Roll over the old 401(k) to your new 401(k), if permitted by your new employer. If you have at least $5,000 saved in your old 401(k), most companies allow you to roll it over.
Cash out your 401(k). This is usually a costly option we advise against because you will face penalties and pay taxes for cashing out before age 59½.

Here are a few ways to potentially avoid costly delays with 401(k) rollovers:

Opt for a direct rollover whenever possible. This trustee-to-trustee transfer bypasses check mailing and may help avoid tax withholdings or penalties.
Avoid indirect rollovers unless absolutely necessary. These may trigger a 20% tax withholding and require you to reinvest funds within 60 days or face tax and penalty consequences.
Don’t delay unnecessarily. If you’ve changed jobs and haven’t rolled over your 401(k), now may be a good time to evaluate your options.

Understand Your 401(k) Rollover Options

401(k) rollover delays

Your 401(k) rollover might not be a top priority, but the compounding impact of missing market growth during volatile or upward-trending periods may leave a lasting dent in your financial future.

We believe understanding all your rollover options before you make a move is crucial, and seeking professional help before you make your move is advisable.

Each investor’s situation is unique, and speaking with someone may help you avoid costly 401(k) rollover mistakes and may help you make the best decision possible for your financial future.

Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

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