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PensionBee Analysis Exposes How Manual 401(k) Rollover Process Profits at Savers’ Expense
Every year, millions of Americans attempt to move their retirement savings from one 401(k) to another account. And every year, they hit the same wall: excessive paperwork, long hours on the phone, and a paper check process that routinely delays transfers by weeks or months.
Providers call the system outdated, but what if it’s working exactly as intended? New PensionBee analysis suggests that 401(k) rollover delays are not glitches, but profitable features built into a system generating nearly $1.4 billion annually.
The Cost of Float
During the 401(k) rollover period, funds are typically converted to cash and held by the provider while your savings are in transit. At the same time, they are earning what’s called float income: risk-free interest that accrues to the provider, not you. So while you’re shouldering the risk of being out of market, providers may generate steady, predictable returns throughout the process.
While the “float rate” is rarely advertised, the income generated comes from investing the cash in safe, short-term instruments tied to prevailing short-term interest rates. As the federal funds rate has risen, these returns have grown more substantial, drawing increased regulatory and legal scrutiny.
Using the current federal funds rate as the benchmark, here’s what float income looks like over three typical rollover periods and check sizes:
Table 1: Float Income by Check Size and Rollover Delay
When scaled across the millions of rollovers processed each year, even modest float earnings translate into substantial aggregate profits. Using conservative assumptions about average rollover amounts and delay periods observed in PensionBee's rollover data, the practice could generate nearly $1.4 billion in annual profit from holding savers’ funds in transit.
But while providers quietly earn from these delays, account holders may pay a steep price. Previous PensionBee analysis revealed that inefficient rollovers can cost savers up to $76,000 in lifetime retirement wealth.
