TRANSCRIPT:

Tom Hawkins: Welcome to yet another edition of the RCH Consolidation Corner Channel, our 20th episode thus far. We continue to provide you, the listener, with audio content that explores key issues in the preservation and consolidation of retirement savings. In this episode, we take a look at some very compelling real-world studies that prove that programs promoting retirement savings portability – and specifically auto portability – work extremely effectively to dramatically reduce cashout leakage. We hope you’ll find the audio enjoyable and informative.

NARRATOR:
Let’s talk about one of the biggest challenges facing our retirement system: 401(k) cashout leakage. Every year, billions of dollars intended for retirement are withdrawn early when 401(k) participants change jobs. In fact, about four in ten participants cash out their retirement savings completely when they leave an employer, amounting to around $92 billion lost annually. If unchecked, this steady loss threatens the core promise of 401(k) plans – security in retirement.

For years, experts have shown that auto portability – a plan feature that allows balances to move seamlessly from one employer’s plan to the next following a job change – could dramatically reduce the cashout leakage problem. And while the case for auto portability has long been supported by authoritative projections and simulation models, actual, empirical data is even more convincing.

Let’s look at two definitive proof points, with links to these studies provided in our show notes. First, a 2013 study from the Boston Research Group tracked a large employer plan with over 190,000 participants. By implementing a portability program, the plan reduced cashout leakage by more than 50 percent over six years, with strong results across all account sizes – and especially for those with smaller balances, who were at greatest risk of cashing out early. These real-world results showed that, given an easy, guided path, participants will keep their savings invested for the future.

Second, Retirement Clearinghouse updated this analysis in 2021, following the same plan as it grew to over 250,000 participants across fourteen years. The results? The reductions in cashout leakage not only persisted – they improved. Cashout leakage stayed more than 50 percent lower than expected without portability, with higher average balances and fewer lost or “stranded” accounts.

Both studies make one thing clear: retirement savings portability works, and it works over the long term.

Why does this matter? Because auto portability is now live via the Portability Services Network, and targets those most likely to lose out – participants with balances under $7,000, who change jobs most frequently and are most likely to cash out. With auto portability, when someone changes their job, their retirement savings can move automatically to the new employer’s plan, unless they choose otherwise – with no paperwork or hassle required.

This isn’t just theory. Decades of data show that a systemic approach can cut leakage in half, preserve more savings, and strengthen retirement security nationwide.

For policymakers, employers, and advocates, the message is simple: portability isn’t a luxury – it’s a necessity. The evidence is clear, and the time to act is now, by embracing retirement savings portability, and specifically, by adopting auto portability.

LINKS TO STUDIES:

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