PensionBee has released new research revealing that millions of Americans may be unknowingly jeopardizing their retirement security by holding funds in “Safe Harbor IRAs.” Drawing on data from the Employee Benefits Research Institute (EBRI), the findings reveal that this rapidly growing market could reach over $43 billion in retirement assets by 2030.
With the average worker holding 12 jobs over their career, the way America works is changing. Frequent job changes have led to millions of small retirement accounts left behind with former employers, with as many as one-third under the threshold for automatic force-out if they left their job.
Safe Harbor IRAs are accounts designed as a temporary solution for small, left-behind 401(k)s. Instead, the majority become long-term traps that can drain retirement accounts through excessive fees and minimal returns.
A Decade-Long Escalation
The research reveals alarming trends accelerating across the U.S. retirement system:
• 25- 30% of employment-based accounts are under the $7,000 threshold, leaving them vulnerable to automatic rollover if the employees left their jobs.
• $28.4 billion is already in Safe Harbor IRAs; by 2030, that figure could exceed $43 billion, an increase of over 50%.
• Just 12.8% of displaced accounts are moved in the first year, and just 25% are moved after three years, suggesting the system isn’t being used as the short-term solution it was intended to be.
“The data provides much-needed numerical clarity on the scale and acceleration of the Safe Harbor IRA problem,” added Romi Savova, CEO of PensionBee. “The likelihood of having at least one of your prior retirement accounts sitting in cash without your knowledge is strikingly high. Unfortunately, the data shows the toll that can take on lifetime retirement wealth.”
PensionBee’s research identifies widespread predatory practices among top Safe Harbor IRA providers, including predatory fees, low returns, and minimal communications with account holders. In extreme cases documented in the analysis, smaller accounts can be completely depleted to $0 through the combination of high fees and minimal returns.
To combat the problem, PensionBee partnered with SS&C Technologies to offer an alternative Safe Harbor IRA. PensionBee’s Safe Harbor IRA is designed to reduce administrative costs for employers while providing a good home for former employee retirement savings. PensionBee and State Street also offer a curated range of Model Portfolios, including a market-leading Target Date Portfolio to help consumers seamlessly transition back into long-term retirement investments.
PensionBee expanded to the U.S market in 2024, with the mission of helping everyday retirement savers simplify and consolidate their retirement savings. The company offers five curated investment portfolios built with ETFs powered by State Street.
White Paper on How Junk IRAs Risk the American Dream
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