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401(k) cash out leakage blog posts
As Time Passes, The Gains Become Harder
RCH's Tom Hawkins, writing in the Consolidation Corner blog, observes that our nearly 45 year-old defined contribution system may face diminishing returns as it tries to generate future growth, and should focus on quality and efficiency as it simultaneously expands access. Using fitness as an analogy, Hawkins offers a "workout plan" for the DC system, including plugging leakage through increased portability and emergency savings, while fostering increased retirement savings consolidation to avoid an explosion in small accounts. When combined with expanded access initiatives, these measures can dramatically increase Americans' retirement security, over and above expanding access alone.
Highway Through the 'Danger Zone'
Writing in the Consolidation Corner blog, RCH's Tom Hawkins notes that the issue of 401(k) cashout leakage is "once again in the news, with the publication of an alarming study by academics, as well as new data from Fidelity Investments." Hawkins goes on to cite "compelling real-world data that supports the efficacy of retirement savings portability in dramatically reducing unnecessary cashout leakage" -- representing "a much-needed highway through the ‘danger zone’ of unnecessary cashout leakage, increasing retirement security for millions of job-changing 401(k) participants."
Financial Literacy Can Help Close the Minority Wealth Gap for Retirement Savings
In observance of Financial Literacy Month, RCH and PSN President & CEO Spencer Williams offers his perspective on how “members of the retirement services industry have an opportunity to pause and think about how they can help empower more people to achieve a financially secure retirement.” Williams notes that plan sponsors and recordkeepers have a vital role in preventing premature 401(k) cashouts via education about their detrimental effects and through the adoption of auto portability “which can enable them to transport and consolidate their accounts instead.”
A Renaissance for Auto Enrollment
Writing in the RCH Consolidation Corner blog, Tom Hawkins examines the past, present and potential future of automatic enrollment, the popular 401(k) plan feature that has made great strides since 2007, but has faced headwinds in achieving adoption in high-turnover enterprises. Now, thanks to a SECURE 2.0 mandate for new plans, along with the retirement industry's embrace of auto portability, auto enrollment may soon undergo a "renaissance" and enter its final phase of growth, delivering disproportionate benefits to under-saved and under-served workers, including minorities, women and those with lower incomes.
The Big Shift Towards Auto Portability
RCH's Tom Hawkins, writing in the Consolidation Corner blog, asks readers if they've noticed the recent "big shift" towards auto portability. Hawkins writes: "[f]or those accustomed to a glacial pace of change in the world of retirement, you could be forgiven if you’ve missed two very recent, tectonic shifts toward the system-wide adoption of auto portability" occurring in rapid succession in the fourth quarter of 2022. The formation of the Portability Services Network (PSN) in October, quickly followed by SECURE 2.0 legislation that included important auto portability provisions, were both "unprecedented actions" which will continue to reverberate in the retirement industry. "The 'big shift'", Hawkins concludes, "won't be completed overnight, but it's already well underway, and will proceed with a pace that could take many more by surprise."
A No-Brainer Benefit that Advisors can Bring to Plan-Sponsor Clients
Writing in the RCH Consolidation Corner blog, Spencer Williams, CEO of Portability Services Network (PSN) and Retirement Clearinghouse (RCH), makes a compelling case for plan advisers to help facilitate the roll-out of auto portability to the plan sponsors and participants they serve. Williams cites two recent headline-grabbing events -- the passage of SECURE 2.0, which incorporates provisions for auto portability, and the October 2022 formation of PSN to function as an industry utility for transferring balances from plan-to-plan. As both participants and plan sponsors stand to realize tremendous benefits from the adoption of auto portability, it "presents an easy opportunity for financial advisors and wealth managers to demonstrate value for their clients—and grow their practices."
2022: A Most Consequential Year for Retirement Savings Portability
Last year at this time, Retirement Clearinghouse (RCH) predicted that 2022 would be a pivotal year for retirement savings portability. It turns out we were right, but we confess to being pleasantly surprised at just how consequential (and positive) the year has been, and it’s not over yet. Writing in the Consolidation Corner blog, RCH's Tom Hawkins provides a rundown of key events during 2022 that have helped to positively shape the future of retirement savings portability.
Webinar Showcases Extraordinary Industry Alignment on Auto Portability
For defined contribution recordkeepers, competition has long been fierce, so it’s extraordinary when industry rivals join forces and align around a common cause. That alignment around auto portability, embodied in the newly launched Portability Services Network (PSN), was on full display in a 12/8/22 Groom Law Group webinar. The event featured representatives from retirement industry titans and founding PSN members Alight Solutions, Fidelity Investments and the Vanguard Group, joined by Retirement Clearinghouse (RCH).