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Many people with rollover IRAs end up stuck in cash, and uninvested cash isn't working for you. Also, if you leave behind a 401(k), your former employer can park the funds in a cash-like Safe Harbor IRA. Here's how to put your money back to work.
By
Romi Savova
published
28 March 2026
in Features
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Financial mistakes tend to fall into two categories: Small missteps and major crises. Miss a credit card payment and get hit with a late fee? Misstep. Lock in major losses during a market crash? Crisis.
Retirement is different. Decades-long timelines turn routine decisions into make-or-break moments, and the consequences are not always clear. Common 401(k) and IRA mistakes can be a gateway to compounding losses. The most dangerous of these mistakes is deceptively simple.
While the retirement industry has made strides in getting people to save, we are failing them on the most critical next step: Putting that money to work.
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Sign upThe biggest threat to the American nest egg isn't a market crash — it's a parking lot.
When cash becomes a six-figure mistake
Millions of Americans roll over their 401(k) plans into IRAs each year. Both accounts hold similar investments and investment potential, but more than one in four people who roll over into an IRA end up stuck in cash. The mistake is common, and the cost is staggering.
About Adviser Intel
The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.
Consider two identical savers who each roll over $50,000 into an IRA at age 35:
- Saver A left their funds in cash (earning 2%), ending up with over $90,000
- Saver B invested in a diversified portfolio (earning 7%), ending up with roughly $400,000 by retirement
After 30 years of compounding, cash costs $300k. This is a steep penalty to pay, especially when you consider that the Employee Benefit Research Institute (EBRI) estimates the average IRA balance is just $114,000.
The risks of job mobility
Most Americans are forced to make complex rollover decisions repeatedly. Each job transition is a new opportunity to tick the wrong box and end up with retirement assets that are working against you rather than for you.
But in some cases, Americans are moved into cash without ticking any box at all.
The most recent EBRI data on the topic confirms that nearly a quarter (24%) of IRAs are "overallocated" in cash, or less than 10% invested in equities. The report suggests many of these accounts may represent the silently growing category of Safe Harbor IRAs.
Each year, employers routinely shift left-behind 401(k)s into cash-like accounts called Safe Harbor IRAs.
Recent industry research found that roughly 2 million accounts are transferred each year. Although these accounts are meant to be temporary, 75% remain in Safe Harbors for at least three years. Worse, the average account holder is in their early to mid-40s and decades from retirement.
The cost of confusion
The U.S. used to guarantee retirement through pensions, much like other countries continue to do today. But while individuals now bear primary responsibility for their retirement outcomes, the path is still far from user-friendly.
Not only is the system opaque, but all of us will need to navigate it — regardless of background, interest and aptitude for finance. Everyday savers shouldn't need the literacy of a fund manager just to guarantee a simple path toward a happy retirement.
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As Americans continue to change jobs frequently, the number of accounts transferred to cash may continue to rise. By 2030, there will be more than $43 billion stuck in Safe Harbor IRAs alone.
Cash-heavy retirement accounts held by people nowhere near retirement age reflect confusion, not preference. Until we have a system that favors simplicity, taking control of the pieces can help:
- Audit your accounts. Log in to every old 401(k) or IRA and check your "asset allocation." If it says "money market" or "cash," you are losing ground to inflation every single day.
- Simplify and consolidate. Multiple small accounts lead to oversight gaps. Moving your funds into a single IRA or 401(k) can make things easier to track and manage.
- Choose a "set and forget" strategy. Use target-date funds. These automatically rebalance your investments based on your age, ensuring you stay invested for growth while gradually adjusting risk over time.
When what's "safe" can slash your nest egg by three quarters, it's worth taking a second look at every box you tick.
Related Content
- Four Reasons to Roll Over Your 401(k) into an IRA (And Four Reasons Not To)
- What to Do With Your 401(k) When You Leave Your Job
- Doing This With Your 401(k) Could Cost You $18,000
- The Costly Mistake You Might Be Making With Your First 401(k)
- What Would Happen if You Put Your Tax Refund in an IRA?
The information provided in this article, including any projections for investment returns and future performance, is for informational and educational purposes only and should not be considered investment advice. Past performance is not indicative of future results. All investments carry risk, including the potential loss of principal. PensionBee is not liable for any losses or damages arising from the use of this information. Projections and forecasts are based on assumptions and current market conditions, which are subject to change.
DisclaimerThis article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
TOPICS Adviser Intel Get Kiplinger Today newsletter — freeContact me with news and offers from other Future brandsReceive email from us on behalf of our trusted partners or sponsorsBy submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.
Romi SavovaSocial Links NavigationCEO and Founder, Pension BeeRomi Savova is the founder and CEO of Pension Bee, a leading online retirement provider she launched in 2014 after experiencing firsthand the complexity of workplace retirement account transfers. Driven by her vision to simplify retirement saving for the mass market, Romi has transformed Pension Bee into a trusted brand with over $7 billion in assets under management and more than 260,000 customers.