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401(k) cash out leakage blog posts
Responding to the Wall Street Journal's 3/20/20 article “The Emergency 401(k) Button” with a letter to the Editor, RCH President & CEO Spencer Williams urges 401(k) savers to exercise caution when considering whether or not to cash out their savings. A hasty decision could result in "the loss of years of compound interest and investment growth that won't be there for retirement" writes Williams, citing a hypothetical 30-year-old, who cashes out $5,000, but stands to lose $52,000 in retirement earnings. Borrowing now, says Williams, is easier than borrowing in retirement, and your "70-year-old self will thank you" for your restraint.
In his latest article in Consolidation Corner, RCH President & CEO Spencer Williams identifies plan-to-plan portability as a vital feature to prevent cashout leakage. Similar to the progress that's been made over the past decade in reducing plan fees, Williams makes the case that the inevitable "institutionalization" of portability will dramatically reduce cashout leakage and maximize participants' retained savings. Williams advocates for the adoption of a dual portability model, comprised of auto portability for small balances and a consent-based, concierge service for participants with larger balances.
Writing in the Consolidation Corner blog, RCH's Tom Hawkins makes the case that socially conscious private-sector corporations will soon solve the nation's 401(k) cashout leakage crisis by fully-embracing plan-to-plan portability, including auto portability. Three key developments drive Hawkins' conclusions, including 1) a growing understanding of the problem and its societal impacts, 2) access to a viable solution and 3) clear acknowledgment of a responsibility to act for the benefit of society. Hawkins further notes that this view is being echoed in retirement research & public policy circles.
In his latest byline in the Consolidation Corner blog, RCH President & CEO Spencer Williams addresses the cashout leakage crisis, which disproportionately affects minorities, including African-Americans and Hispanics. Auto portability, says Williams, can make all the difference in solving the crisis, but requires that "sponsors themselves, as well as their recordkeepers, take the next step by implementing....auto portability" -- an action which he characterizes as being completely consistent with a recent public statement by the Business Roundtable, and endorsed by 181 CEOs of the nation's largest corporations.
In his latest Consolidation Corner article, RCH President & CEO Spencer Williams examines the current state of financial wellness programs, and the challenges plan sponsors face in quantifying their benefits. Facilitating retirement savings portability, writes Williams -- whether through auto portability for small balances or an assisted roll-in program for larger balances -- can overcome this challenge by offering sponsors a financial wellness initiative that preserves participants' retirement savings and is easily quantifiable.
Writing in RCH's Consolidation Corner blog, RCH President & CEO Spencer Williams observes that safe-harbor IRAs -- created by the EGTRRA-mandated automatic rollover process -- were never intended to be "permanent retirement savings vehicles." Too often, argues Williams, the relief plan sponsors realize from automatic rollovers comes at the expense of participant outcomes -- who experience high levels of cashouts, low investment returns and savings-depleting fees. With the advent of auto portability, participants will spend less time in a safe harbor IRA, and "plan sponsors no longer have to consider trading participant outcomes for administrative convenience."
In the fifth installment of his five-part series on 401(k) cashout leakage, RCH's Tom Hawkins addresses auto portability, a solution that not only makes sound business sense, but delivers a positive societal impact for the corporations adopting it. Citing the recent Statement of Purpose from members of the Business Roundtable, Hawkins believes that as these socially-conscious corporations examine auto portability, they’ll quickly become convinced that auto portability is both a sound business decision, as well as the right thing to do.
In his five-part series in Consolidation Corner, RCH's Tom Hawkins sheds light on the problem of cashout leakage, a silent crisis that unnecessarily robs millions of Americans of their retirement security. In his fourth article in the series, Hawkins addresses policies with the most promise to reduce the 401(k) cashout leakage problem.