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401(k) cash out leakage blog posts
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."
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."
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.
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).
CHARLOTTE, October 5, 2022—Fidelity Investments®, Vanguard, and Alight Solutions announce that they have collaborated with Retirement Clearinghouse, LLC (RCH) to create a consortium of workplace retirement plan recordkeepers, Portability Services Network, LLC, to accelerate the nationwide adoption of auto portability to help America’s under-served and under-saved workers improve their retirement outcomes.
401(k) plan consultants have been forceful advocates for the adoption of best practices at leading retirement plan sponsors. However, when it comes to automatic rollover programs, plan consultants sometimes miss the mark, at least in terms of participant outcomes. RCH's Tom Hawkins, writing in the Consolidation Corner blog, makes the case that 401(k) plan consultants should extend their analysis to emphasize those automatic rollover program components that help participants improve their retirement outcomes by avoiding cashouts, moving their retirement savings forward, and keeping their stay in safe harbor IRAs as brief as possible.
In observance of National 401(k) Day on Friday, September 9th, RCH's Tom Hawkins takes the opportunity to reflect on the long-running, highly successful public-private collaboration that has fostered the rapid ascendance of America’s 401(k) system. Hawkins writes that "this partnership will continue to drive innovations that will expand and improve the 401(k) system for millions of Americans – not only helping them to save more but preserving more of their savings for retirement."
Every Dollar Saved for Retirement Matters -- So Save More By Avoiding Cash-Outs & Consolidating 401(k) Accounts
RCH Founder, President & CEO Spencer Williams examines the implications of a study from Boston College's Center for Retirement Research, finding that the youngest Baby Boomers, with less access to defined benefit (DB) plans than their predecessors, are drawing down their 401(k)-based retirement savings at much faster rates, with many poised to run out of retirement savings by age 85. These findings underscore the need to preserve more 401(k) savings for younger generations, and according to Williams, the best way to do that is "to consolidate 401(k) savings accounts.....and to avoid making any premature cash-outs." Sponsors, states Williams, "can....help participants save more for retirement, so they don’t outlive their savings, by adopting auto portability.