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401(k) cash out leakage blog posts

Nov
29
2023

Auto Portability: It’s About the Participants

Writing in RCH's Consolidation Corner blog, Tom Hawkins reminds readers what auto portability is all about -- improving the retirement security of marginalized defined contribution participants. These participants -- comprised largely of minorities, women, younger and lower-income participants -- not only need auto portability the most, but there's solid evidence that they want it as well. To support his claim, Hawkins cites three highly-regarded surveys that have found a strong participant preference for auto portability and for consolidating small balances within the defined contribution system, and believes that recent developments will "augur well for Americans’ retirement security."

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Aug
31
2023

A Perfect Storm is Brewing—But Automated Portability Could Defuse It

RCH and PSN President & CEO Spencer Williams, writing in the Consolidation Corner blog, notes that a rising incidence of hardship withdrawals and 401(k) loans – as reported by Bank of America – combined with a pending increase in the account-balance limit for automatic rollovers effective 12/31/23, could create a “perfect storm” for depleting Americans’ retirement savings. “Fortunately,” writes Williams, “sponsors and recordkeepers have access to a solution that can help them clean up their plans without automatically rolling terminated accounts into safe-harbor IRAs.” Auto portability, continues Williams, is a “capability [that] is more essential than ever, with 401(k) plan enrollment continuing to increase” and could serve to defuse the brewing storm of potential cash-outs.

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Aug
30
2023

Focus Shifts to Plan Sponsors as Portability Network Set to Go Live

Writing in the Consolidation Corner blog, RCH's Tom Hawkins describes the coming "shift" that will occur when the Portability Services Network (PSN) goes live at the beginning of the fourth quarter of 2023. Describing PSN's network-building achievements to date as "nothing short of phenomenal", Hawkins adds that "integration had proceeded apace" and that "plan sponsors will take center stage as they begin to adopt auto portability and witness its tangible results." Plan sponsor adoption will accelerate as auto portability demonstrates its obvious benefits to plans, to participants and to society at large, where adoption will eventually serve as a "positive indicator of a socially responsible enterprise."

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Aug
11
2023

The Future is Brighter for Small-Balance Retirement Accounts

RCH's Tom Hawkins, writing in the Consolidation Corner blog, describes the "brighter future" emerging for small-balance retirement savings accounts. Hawkins maintains that these accounts, which he associates with an increased incidence of sub-optimal participant outcomes, will fare much better in the future due to "large-scale, industry-led action on auto portability, and more recently, proactive steps being taken by leading providers to consolidate legacy small-balance IRAs."

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Jun
20
2023

The New Urgency for Mitigating 401(k) Account Cash-Outs

Findings in a recent study by the Sauder School of Business at the University of British Columbia (UBC) underscore that, despite all of the media articles offering tips for how to save more for retirement, many Americans still make the self-destructive decision to cash out their savings following a job separation. RCH’s Spencer Williams, writing in the RCH Consolidation Corner blog, reminds readers that “there are solutions in place for 401(k) plan sponsors and recordkeepers to help participants avoid the all-too-easy decision to cash out their savings” including auto portability, which is also supported by substantial research demonstrating its efficacy in preventing cashout leakage.

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May
11
2023

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.

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Apr
28
2023

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."

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Apr
01
2023

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.”

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