The number of assets in lost 401(k) accounts increased 30% to reach a staggering $2.1 trillion, according to the latest analysis by retirement plan rollover platform Capitalize.
The firm today released an update to its 2023 report, “The True Costs of Forgotten 401(k) Accounts,” in partnership with the Center for Retirement Research (CRR). It found a continued growth in the number of misplaced 401(k) accounts, to 31.9 million as of July 2025.
Further, the analysis shows continued growth in the number of lost 401(k) accounts over the years. Three and a half million accounts were left behind in 2023, while four million were forgotten in 2024. Another 4.2 million are predicted to stray in 2025.
Higher 401(k) participation rates and ongoing complexity in the 401(k)-rollover process have pushed unrelenting growth in missing retirement accounts, says Gaurav Sharma, CEO at Capitalize. As each 401(k) provider determines their own process, there is little room for uniformity or standard protocols for transferring retirement assets, he says.
One example highlights how retirement plan rollovers differ from standard brokerage transfers. While traditional brokerage transfers move securities directly from one brokerage to the other, 401(k) account assets are completely liquidated before being transferred to cash.
“Each 401(k) provider determines their own process by which they accept rollover requests, and they can vary widely. Some of those might be online processes, but many of them are paper- or phone-based. In the absence of standardization, providers often stick with legacy processes,” Sharma says to 401(k) Specialist.
Overlooking or misplacing a retirement account could end up costing a participant up to $500,000 in lost savings, Capitalize notes in its research. The average account balance of a lost 401(k) increased from $56,616 in 2023 to $66,691 today, and assets left behind from former workers continue to represent nearly 25% of total 401(k) savings.
The analysis also highlights a surge in layoffs among federal government workers, which in recent months has triggered a flow of abandoned retirement accounts. According to the findings, 2.8 million Thrift Savings Plan (TSP) accounts are now expected to be left behind by the end of 2025, for a rise of 14% compared to 2024. This could potentially grow even further as the Trump administration calls for mass layoffs amid a looming federal government shutdown.
“While smaller than the number of left-behind 401(k)s, volatility in the Federal government workforce may lead to more forgotten account dynamics in the public sector,” Capitalize states in its research.
New dynamics with alt investments
The potential inclusion of alternative investments in 401(k) accounts, driven primarily by President Donald Trump’s executive order in August, could impact the rollover process, Capitalize states.
Lack of liquidity with alternative investments is a major factor, as these funds cannot be sold as quickly compared to other assets without price changes. The research explains that while most investments in 401(k) assets are priced daily like stocks, bonds, index funds, and mutual funds, traditional alternative investments are priced quarterly or annually.
“If somebody owns a direct interest in an alternative asset, they may not have the same type of liquidity as they do with a publicly traded equity, target date fund, or ETF. The reason that matters is because 401(k) accounts are almost always liquidated before being rolled over, so having an illiquid asset could make that process a little trickier,” Sharma comments.
In the event of a job change, participants who don’t have access to alternative investments in their new plan will be forced to assess what to do with a private equity investment in their 401(k). This could also bring on additional learning curves, like understanding fees and valuation differences, Capitalize’s research states.
To address these concerns, Capitalize says it expects to see greater private equity exposure in new target date funds (TDFs), which could consist of public equity, fixed income, and alternative investments. Offering such funds will provide investors with the liquidity needed when experiencing a job change.
“It’s for this and other reasons that we expect most of the initial exposure to alternatives within 401(k)s to come through modified target date funds which might include a little private equity,” he states. “Those may end up being easier to liquidate and those roll over, but if direct interests in alternatives are the goal, we’ll likely need modifications to the rollover process.”
Despite advances, challenges remain
While several initiatives have sought to reunite participants with forgotten 401(k) accounts, like the Department of Labor’s (DOL) Lost-and-Found database, challenges remain in helping participants access and transfer funds.
As a result, more fintech providers are offering services aimed at rolling over legacy 401(k)s with a digital-first attitude. In March, Capitalize and investing platform Public partnered on helping members of the latter transfer legacy 401(k)s to individual retirement accounts (IRAs), all on Public’s digital platform. Later in May, the rollover provider collaborated with SoFi in adding 401(k) consolidation for participants.
Moving forward, Sharma predicts technology to be the leading driver in the future of 401(k) account rollovers and consolidation, especially among private sector workplaces.
“We do expect private sector adoption of better rollover technology solutions, though, to help over the next few years and we’re certainly excited to participate in that,” he affirms.
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