Automatic Rollover IRAs Erode Retirement Savings as Balances Decline, PensionBee Study Finds

Automatic rollover IRAs are draining retirement savings rather than growing them, with 68% of such accounts losing value after one year and 39% still worth less than at creation after eight years, according to an Oct. 21 white paper from retirement provider PensionBee. The accounts, created when employers move departed workers' 401(k) balances of $7,000 or less into cash-equivalent Safe Harbor IRAs without consent, typically earn 1% to 2% annual interest while administrative fees—such as $100 to open and $5 monthly—erode principal. PensionBee CEO Romi Savova said most holders are unaware the funds can be moved. Automatic rollovers are projected to double to 2.2 million annually by 2030 from 1.1 million in 2022, potentially leaving 13 million accounts holding $43 billion in assets stranded, per PensionBee and Employee Benefit Research Institute data. More than $2 trillion sits in forgotten or left-behind retirement accounts industry-wide, the report said.