Picture this — you’re checking your retirement account, ready to see the money you’ve set aside over the years, but instead of seeing growth, you realize your savings have been slowly eaten away — almost down to nothing. Crazy, right? Unfortunately, this isn’t just a nightmare scenario, it’s a reality for thousands of people whose hard-earned retirement money gets stuck in bad investments with high fees and low returns after getting forced out of their former employer’s account.
What is a Safe Harbor IRA?
If you’ve ever left a job and had a 401(k) with a small balance (under $7,000), your former employer may have moved your savings into a Safe Harbor IRA. Employers are usually required to notify you before rolling over your funds but if you don’t take action within 30 - 60 days, they may automatically roll it over for you. These accounts are designed to safeguard forgotten or abandoned retirement funds, particularly small balances.
It might seem like a good idea to leave your savings in one place until you figure out what to do with them, but the truth is, these accounts often come with hidden fees and lower returns, providing a lot less protection than you'd expect.
The Hidden Costs That Eat Away Your Savings
While 401(k) plans generally charge reasonable fees — often averaging around 0.85% for larger plans — Safe Harbor IRAs are subject to different rules. These accounts may come with additional fees, such as monthly charges, balance-based fees, and sometimes high withdrawal fees, which can make them less straightforward than other options. PensionBee's approach ensures transparency and keeps fees competitive, making it a favorable alternative for those seeking simplicity and clarity.
For example, one prominent Safe Harbor IRA provider charges $5.67 a month plus 0.5% of your balance each year. If you have $3,500 in the account, that adds up to over $85 in fees a year. If your money just sits there, your account could eventually be drained — even faster if you make withdrawals. Another provider charges a $35 yearly fee plus 0.3% of your balance. It might not seem like much, but with the low returns these accounts usually offer, it can take a bite out of your retirement savings.
