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Consolidation Corner Blog
Consolidation Corner is the Retirement Clearinghouse (RCH) blog, and features the latest articles and bylines from our executives, addressing important retirement savings portability topics.
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.
The Explosion of Small-Balance IRAs
In his latest post in RCH's Consolidation Corner, RCH's Tom Hawkins examines EBRI's 10/1/20 Fast Facts - Losing Ground Safely: Small IRAs’ Large Stake in Money - which offers new insight into the magnitude of a small-balance IRA “explosion” being fueled by automatic rollovers, as well as the sub-optimal retirement outcomes they produce. EBRI's new information provides yet another data point in favor of 401(k) consolidation via auto portability and could serve to inform future regulatory guidance by expanding auto portability’s mandate to consolidate these previously “stranded” safe harbor IRAs back into our 401(k) system.
From Tired to Inspired: A Roadmap for 401(k) Roll-Ins
In his latest article in RCH's Consolidation Corner, RCH's Tom Hawkins walks readers through a "roadmap" for the progression of 401(k) roll-ins from ‘tired’ to ‘wired’ and finally, to the ‘inspired’ state that will eventually characterize 401(k) plan-to-plan portability. The article also includes a video providing viewers with the key points made in the article.
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."
Automated 401(k) Portability: An Idea Whose Time Has Come
Writing in the RCH Consolidation Corner blog, Tom Hawkins examines the vital importance of automation in transforming 401(k) portability from an impractical “great idea” into a reality – and not just for small-balance participants, but eventually for the entire 401(k) ecosystem – including participants, plan sponsors and their service providers.
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.