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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.
Brexit Reminds Retirement-Savers Why Account Consolidation is Important
In his most recent article in MarketWatch, RCH's Spencer Williams cites the recent market trauma experienced in the wake of the United Kingdom's decision to exit the European Union (Brexit) as a good reason for retirement-savers to consolidate their accounts.
First Half of 2016: A Look-Back at the Headlines Driving a New "Auto" for 401(k) Plans
In the first half of 2016, not only has the retirement industry awakened to the problem of cashout leakage, but it's begun to acknowledge its root cause: a lack of retirement savings portability. At the same time, Auto Portability has emerged as the only viable solution to cashout leakage, delivering portability for the small-balance (less than $5,000) job-changer, automatically moving their balances forward when they change jobs and enroll in a new plan. Let's look-back at the first half of 2016 and see how Auto Portability may now be poised to become an "overnight success" in the not-too-distant future.
Embracing A New Source of Plan Growth
In the wake of the Fiduciary Rule, providers of all stripes are broadly reevaluating their strategies for the participant and asset retention that is essential to growing their retirement plan businesses. Over the past two decades, providers have primarily looked to capture IRA rollovers as a means to grow retirement assets. The Department of Labor's new Fiduciary Rule creates challenges to that model. However, there is another, largely untapped, pool of assets within providers' reach that can fuel growth premature cash-outs. Auto portability, and portability solutions in general, represent a new and unique way to tap that potential source of growth.
When it Comes to Saving for Retirement, Millennials Can Learn from Baby Boomers' Mistakes
In his 6/30/16 MarketWatch article, RCH President and CEO Spencer Williams suggests an inter-generational dialogue on the pitfalls to avoid when saving for retirement.
RCH and EBRI Present Consolidated Testimony on Auto Portability before the ERISA Advisory Council
On June 8th, 2016 Retirement Clearinghouse (RCH) and the Employee Benefit Research Institute (EBRI) teamed up to present consolidated testimony to the ERISA Advisory Council on Auto Portability, the automation of plan-to-plan transfers for small accounts, when participants change jobs.
Calls for Portability Solutions to Curb Cash Out Leakage Growing Louder
Cash out leakage, the premature withdrawal of retirement savings for non-retirement expenses, is a persistent problem in the retirement industry, and growing more pervasive as employee mobility increases.
Interesting Finding Emerges from the Auto Portability Simulation
When the Auto Portability Simulation (APS) model was recently unveiled at EBRI's 78th Policy Forum, a lot of attention was paid to the "marquee" numbers, and rightly so. I am referring here to the $154 billion reduction in cashout leakage, as well as the $115 billion increase in plan-to-plan roll-ins that occur under the adoption of Auto Portability.
Fast & Slow Leakage Produce a Flood of Outflows
First, let's review the definition of "leakage." If we think of total 401(k) savings as a bucket of water, "leakage" refers to those retirement savings that, like water in a leaky bucket, are withdrawn from the U.S. retirement system every year. There are three holes in the bucket: cash-outs at the point of job change, hardship withdrawals, and loan defaults. According to the U.S. Government Accountability Office, one of these holes is much bigger than the other two combined nearly 89% of all leakage is attributed to cash-outs that occur when a participant changes jobs. Hardship withdrawals and loan defaults together account for the remaining 11%.
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