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401(k) cash out leakage blog posts
Closing the Coming COVID-19 Retirement Savings Gap
Writing in Consolidation Corner, RCH’s Tom Hawkins foresees the emergence of a COVID-19 retirement savings gap, driven by unprecedented levels of terminated participants and relaxed penalties on withdrawals. To address the problem, Hawkins calls upon the private sector to embrace solutions that will begin to close the gap, stem cashout leakage and deliver ongoing benefits that will extend well beyond the current crisis.
Alight Solutions to Lead Nationwide Launch of Auto Portability
In a press release issued Tuesday, July 14th, Retirement Clearinghouse (RCH) announced that Alight Solutions will lead the nationwide launch of the RCH Auto Portability program.
401(k) Cashout Leakage: A Reality, Not a “Narrative”
In his latest article in Consolidation Corner, RCH's Tom Hawkins provides his take on the topic of 401(k) cashout leakage, examining a recent study by the Investment Company Institute (ICI). Hawkins writes that the ICI study -- while using an innovative approach to mine 2010 tax data -- fell short in providing accurate or timely estimates of 401(k) cashout leakage levels, which are best-reflected in research conducted by EBRI, by large recordkeepers and summarized by the Savings Preservation Working Group.
COVID-19 Pandemic Demonstrates the Need for Institutionalized Portability
Writing in Consolidation Corner, RCH President & CEO Spencer Williams examines the disruptive effects of the COVID-19 pandemic on America's retirement savers, and makes a persuasive case for the systemic, institutional adoption of auto portability as a means to help rebuild and to preserve retirement savings over the long-term. In the near-term, Williams observes that reduced participant mobility make this an opportune time for sponsors to update participant addresses.
A Critical Time to Protect the Vulnerable
Writing in Consolidation Corner, RCH's Tom Hawkins addresses the need to protect newly-terminated, vulnerable participants during the COVID-19 crisis. Hawkins points out that these participants are particularly vulnerable to financial emergencies, or in many cases, simply to poor decision-making. Hawkins urges sponsors to take additional steps to listen, to educate and to protect these participants -- not only during the crisis, but beyond.
To Show Participants You Care, Help Them Avoid Cashing Out Post-CARES Act
As participants affected by the COVID-19 crisis consider whether or not to withdraw retirement savings under provisions of the CARES Act, RCH’s Spencer Williams offers plan sponsors constructive advice for engaging them.Writing in RCH’s Consolidation Corner, Williams acknowledges the need for millions to have a “financial lifeline” but suggests that sponsors remind participants via email communications and digital content “that their retirement savings should be considered a last resort for meeting emergency expenses, especially during the present crisis.”
Think Twice Before Tapping Your 401(k) for Short-Term Needs
Responding to the Wall Street Journal's 3/20/20 article “The Emergency 401(k) Button” with a letter to the Editor, RCH President & CEO Spencer Williams urges 401(k) savers to exercise caution when considering whether or not to cash out their savings. A hasty decision could result in "the loss of years of compound interest and investment growth that won't be there for retirement" writes Williams, citing a hypothetical 30-year-old, who cashes out $5,000, but stands to lose $52,000 in retirement earnings. Borrowing now, says Williams, is easier than borrowing in retirement, and your "70-year-old self will thank you" for your restraint.
The Institutionalization of Portability is Key to Reducing Cash-Out Leakage
In his latest article in Consolidation Corner, RCH President & CEO Spencer Williams identifies plan-to-plan portability as a vital feature to prevent cashout leakage. Similar to the progress that's been made over the past decade in reducing plan fees, Williams makes the case that the inevitable "institutionalization" of portability will dramatically reduce cashout leakage and maximize participants' retained savings. Williams advocates for the adoption of a dual portability model, comprised of auto portability for small balances and a consent-based, concierge service for participants with larger balances.
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