Workers who switch jobs and leave behind small 401(k) balances face a narrow set of outcomes, and new data from Vanguard and PensionBee suggest most are not favorable. The research, released this week, highlights the trade-offs between auto-portability networks and the default IRAs that hold balances awaiting transfer.
Vanguard's analysis of 83 recordkept plans that joined the Portability Services Network—a collaborative effort with Fidelity, Alight, and Retirement Clearinghouse, later joined by Empower in 2023—found a dramatic reduction in cash-outs for the smallest accounts. Among departing participants with balances under $1,000, roughly 50% cashed out within 10 months before their plans adopted the network. After adoption, that share fell to about 9%. For balances between $1,000 and $7,000, cash-out rates slipped from 39% to 31%, a more modest improvement that Vanguard attributes to participant choice playing a larger role than default mechanics.
The network appears to reach the workers most prone to draining their savings. Vanguard's survey data show the typical auto-portability user is 31 years old, has about six months of job tenure, and earns roughly $20,000 annually. The median rollover sent through the network is just $200, underscoring the small-dollar nature of these accounts.
Despite its impact for users, the network's reach remains limited. While it covered more than 21,000 plans in early 2026, that represents only about 3% of U.S. 401(k) plans, according to Vanguard's estimates. The firm has moved roughly 220,000 participants through the network, but only about 6% have been matched to a new employer plan. The remaining 94% sit in interim safe harbor IRAs, where costs can accumulate.
Vanguard's analysis assumes a $2 monthly account fee and a 3% yield. Under those assumptions, an account needs about $800 just to cover a year of fees with its earnings. Given that 73% of transferred balances are $1,000 or less, many accounts may struggle to break even.
PensionBee's research, based on Employee Benefit Research Institute (EBRI) data, illustrates the consequences of waiting. The firm found that 68% of automatic rollover IRAs were worth less after one year. These accounts were designed as a short-term stopgap, yet 87% were still open after a year and 52% after eight years. Of the accounts that remained open for eight years, 39.4% had lost value, and the share that had lost more than 75% rose from 1.8% after year one to 6.1% by year eight.
Small accounts fared worst. Among accounts that started at $1,200 or less, 47.1% had lost value by year eight, compared with 29% of accounts that began above $2,500. PensionBee attributes the losses to flat fees and cash-heavy defaults. EBRI estimates that 76% of these assets sit in cash-like investments, which typically earn 0.5% to 2%. A $100 opening fee plus a $5 monthly charge would consume $160 in the first year, or 13.3% of a $1,200 balance.
“The data suggests that most Automatic Rollover IRAs function as long-term accounts,” said Romi Savova, founder and CEO of PensionBee. “Many perform so poorly that they better resemble traps, leaving millions of savers with just a fraction of the original balance they left behind in the 401(k).”
The findings come as the retirement industry grapples with the growth of so-called “junk IRAs,” which PensionBee projects could become a $43 billion problem by 2030. The data excludes accounts that were drained to zero, so actual losses may be larger. PensionBee, which itself offers automatic rollover IRAs, wrote the report's recommendations, while EBRI handled the data analysis.
For advisors, the research underscores the importance of proactive guidance when clients change jobs. As 401(k) plans rival healthcare as a top employee benefit, helping clients understand their options—whether to roll over, leave in place, or consolidate—can prevent erosion of retirement savings. The growth of invested assets in HSAs and other retirement vehicles also highlights the need for holistic planning. Savova noted that with up to 12 jobs over a career, “the average person will likely need to make important retirement decisions at several points throughout their career,” and employers still have a role in encouraging active choices rather than accidental ones.
