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401(k) cash out leakage blog posts
Elections Have Consequences—Elect to Help Participants Keep Their Savings, Instead of Losing Their Savings via Mandatory Distributions
Against the backdrop of uncertainty surrounding the 2020 Presidential election, RCH President & CEO Spencer Williams takes to RCH’s Consolidation Corner to remind us of the real impact other choices can have on people’s lives. For plan sponsors who care about preserving their participants’ retirement benefits, Williams urges them to “elect” auto portability and play a decisive role in helping millions of Americans save more for retirement.
Broadcast Retirement Network Features Segment on ‘Small Account Problem’
On Wednesday, 11/4/20 the Broadcast Retirement Network’s Jeff Snyder interviewed Retirement Clearinghouse (RCH) President & CEO Spencer Williams and Alight Solutions’ Vice President & Head of Research Rob Austin to address the 401(k) system’s small account problem – where high levels of cashout leakage in small balance segments perennially robs millions of participants of a timely or comfortable retirement.
If Timothy Leary Were a 401(k) Plan Sponsor
In the 1960’s, counter-culture guru Timothy Leary urged a generation to “turn on, tune in and drop out.” If Leary were still around and sponsoring a 401(k) plan, he might urge participants to “save up, move on and cash out.” While that sounds contradictory and profoundly ill-advised, it’s exactly what 5 million job-changing 401(k) participants do in the 1st year following separation. In his latest Consolidation Corner blog post, RCH's Tom Hawkins explores the reasons for so many cashouts, and how – with viable solutions now available – plan sponsors should fully-embrace seamless plan-to-plan portability.
Every Dollar Counts in Today’s Zero-Interest-Rate Environment
In his latest piece for the RCH Consolidation Corner blog, RCH President & CEO Spencer Williams analyzes the phenomenon of low interest rates and its long-term effects on retirement savers. Williams observes that, in a low interest rate environment, more savings are required to generate an equivalent amount of retirement income, so avoiding unnecessary cashout leakage is paramount. To achieve this goal, Williams urges plan sponsors to adopt auto portability, a technology solution that's "available to help sponsors make every dollar count for participants during these extraordinary times."
401(k) Plan Terminations Could Produce New Wave of Cashout Leakage
In his latest article in Consolidation Corner, RCH’s Tom Hawkins draws attention to the coming surge in COVID-19 related terminating 401(k) plans, which Hawkins predicts could result in a flood of cashout leakage. Participants of these terminating plans, when given an ultimatum to act, will cash out far too often, unless they are provided with sufficient education and consolidation assistance. In their final act of fiduciary responsibility, Hawkins urges sponsors of terminating plans to insist on these measures to stem unnecessary cashout leakage and to protect their participants’ retirement security.
‘Sudden Money’ and Preserving 401(k) Savings Don’t Mix
Writing in RCH’s Consolidation Corner blog, Tom Hawkins establishes a strong link between the phenomenon of ‘sudden money’ – where a financial windfall can result in ruinous decisions – and the problem of unnecessary 401(k) cashout leakage. 401(k) plan features that encourage active plan participants to amass long-term retirement savings are a big success, but can suddenly fail following a job change, when separated participants can view their former employer’s balance as a financial windfall. To address the scourge of sudden money and its attendant cashout leakage, Hawkins examines 3 ‘faux’ solutions that fall short, and recommends the application of clearinghouse principles to effectively solve the problem.
The Tragicomedy of Cashout Leakage
In his 8/11/20 article in RCH’s Consolidation Corner, RCH’s Tom Hawkins characterizes the phenomenon of cashout leakage as a “tragicomedy” – incorporating aspects of both a tragedy and a comedy, but ultimately delivering a happy ending. While cashout leakage represents an ongoing tragedy, the term itself is goofy, and tough to take seriously, asserts Hawkins. However, recent events indicate that the widespread adoption of auto portability will finally deliver a happy ending to the problem.
How to Mitigate COVID-19’s Potentially Catastrophic Impact on Americans’ Retirement Readiness
Writing in RCH's Consolidation Corner blog, RCH President & CEO Spencer Williams addresses the urgent need to mitigate the impact of COVID-19 on Americans' retirement readiness. Williams observes that the surge in pandemic-driven unemployment, the relaxed restrictions on withdrawals, along with a pre-existing propensity to cash out -- spells trouble for retirement security. To help address the growing threat, Williams urges sponsors and recordkeepers to adopt auto portability, which he states will "discourage participants from cashing out, but also eliminate the need for automatic cash-outs."
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