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Key Takeaways:
1. The 401(k) paradox:
- Each year, more private sector employers offer 401(k)-style retirement plans, and a majority of their employees have now opted in. But the uplift in adoption is no match for the number of Americans who continue to leave behind these same accounts with former employers at an increasing rate.
2. The acceleration:
- PensionBee analysis of U.S. Department of Labor (DOL) data estimates that dormant 401(k) accounts are growing nearly 3x faster than active accounts, exposing deep cracks in America’s fragmented retirement picture.
3. The shifting balance:
- By the end of 2026, PensionBee estimates over 30% of all funded workplace accounts could be dormant, up from 21% in 2012.
50 years later, 401(k)s are here to stay
401(k) adoption is rising.
Nearly five decades after the launch of 401(k)s, more than half of private-sector Americans are using these plans to save for retirement. U.S retirement savers have amassed over $13 trillion in workplace defined contribution (DC) plans, making America the largest DC market in the world.
But the success of 401(k)s masks a troubling problem: as more employees opt in to workplace retirement plans, a growing proportion opt out of actively managing their retirement savings. Previous estimates suggest as many as 30 million 401(k)s are currently left behind with old employers – sitting dormant.
PensionBee’s analysis of eleven years of Form 5500 data shows workplace retirement accounts have grown at a steady clip.
D.C. plans rose consistently from 637,000 in 2012 to approximately 791,000 in 2023, according to the most recent DOL report. Based on that report, PensionBee estimates that in 2026, this number will continue to grow to over 893,000. The average 401(k) balance in 2023 was $98,000.
401(k)s grow, dormant accounts surge
The steady push to expand 401(k) adoption has strained a system already struggling to support an increasingly mobile and entrepreneurial workforce. As Americans continue to shift between traditional employment and gig work, averaging twelve jobs over their career, managing more than one 401(k) is the new normal.
But even as barriers to 401(k) enrollment continue to fall away, the necessary infrastructure to support a hypermobile workforce lags far behind. Now, the numbers suggest that a growing proportion of Americans may be losing track of their retirement savings as they move throughout their careers.
PensionBee estimates that while active 401(k) participants grew by 44% between 2012 and 2026, the number of dormant accounts accelerated nearly 3x faster, ballooning 130% to grow from 14.2M to 32.8M.
Figure 1
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As a result, a growing proportion of accounts with a balance are likely not under active management by the account holder.
In 2012, the DOL data suggests 21% of accounts with a balance were dormant. By 2023, the number grew by 8%. In 2026, PensionBee estimates that over 30% of funded accounts may sit dormant.
Figure 2
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If nothing changes, PensionBee expects that dormant account growth will continue to outpace that of active accounts– risking the savings of a growing share of working America’s retirement money.
