Consolidation Corner

Why America’s Retirement Savings Needs Recycling

Posted by Thomas Hawkins on Apr 24, 2017 10:58:04 AM


As we marked the 47th annual Earth Day on April 22nd, we were once again reminded of the need to protect our environment. This heightened awareness is testament to how far Americans have come in both recognizing and curbing the wasteful, destructive behaviors that emerged in the decades following World War II. Those excesses have given rise to conservation and environmentalism, and were heralded by the first Earth Day in 1970. 


Today’s Wasteful Behavior: Cash Out Leakage


While we may be more environmentally-conscious these days, we don’t apply the same principles financially. There is a highly-wasteful and harmful behavior that silently robs millions of the prospect for a comfortable or timely retirement. Every year, millions of Americans will needlessly cash out their retirement savings after changing jobs, converting these savings into wasted consumption and avoidable tax penalties.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation, National Retirement Savings Cash Out Clock

The African-American Retirement Crisis: How Auto Portability Can Help

Posted by Thomas Hawkins on Mar 30, 2017 4:11:40 PM

Today, many Americans are hard-pressed to set aside enough savings for a timely or comfortable retirement.   The factors most-often cited as driving the coming “retirement crisis” include longer life expectancies, rising healthcare costs and stagnant incomes. 


The African-American community faces these same challenges plus other economic headwinds, but with larger hurdles to overcome to secure a comfortable retirement.   Nowhere is this more apparent than in America’s defined contribution system, where African-Americans are confronted by: 

  1. Lower overall use of employer-sponsored plans. In 2013, only 41% of African-American families had retirement savings accounts, vs. 65% of white, non-Hispanic families. 
  1. Lower levels of plan enrollment and contribution rates, including:

-  68% average plan enrollment, vs. 79% for white participants

-  2% lower contribution rates, vs. white participants

  1. Unfavorable demographic, economic and work-related factors. Compared against their white counterparts, the average African-American plan participant is 14% younger, has 10% less job tenure, earns 30% lower average salary and has 28.4% higher job turnover.
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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Automatic Rollover, auto portability simulation

March 30th Washington DC Forum to Showcase Retirement Plan Portability & Public Policy

Posted by Thomas Johnson on Mar 23, 2017 6:34:27 AM


An upcoming event in Washington, DC, to be held on March 30th and hosted by the Financial Services Roundtable, promises to be both highly-interesting and informative, addressing the very latest in retirement plan portability research and development.


The event, Retirement Plan Portability & Public Policy: Unlocking the potential in portability, will take place at the Financial Services Roundtable’s headquarters [map] from 10:30 a.m. to Noon, and is free to attend. To register, click here. Click here to view a full agenda.


The event features an all-star lineup of presenters, including:


Key topics include:

  • New research by the Employee Benefit Research Institute (EBRI) on the overall benefits of portability to America’s defined contribution system
  • The latest on Auto Portability, including:
    • Auto Portability Explained
    • The Auto Portability Advisory Opinion
    • An Auto Portability Progress Report
    • Auto Portability & the Future of Portability
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Topics: Auto Portability, 401(k) Consolidation, Plan Portability, America's Mobile Workforce, Retirement Plan Portability, Financial Services Roundtable

Big Changes Coming for Small 401(k) Accounts

Posted by Thomas Hawkins on Feb 27, 2017 10:27:59 AM


The pace of change in today’s world is faster than ever -- and accelerating.  Consider the vast change witnessed by today’s centenarians over the course of their lives – moving from the horse-and-buggy to aviation, moon landings, the Internet and smartphones.


However, changes to America’s retirement system seem to unfold more slowly – sometimes moving at “the speed of retirement” – a glacial process driven by the moribund pace of legislation, further establishment of rules by regulatory agencies, the delivery of new features by service providers, eventual adoption by the plan sponsor community, and finally – by the individual actions of participants over the course of their working lives. 


Even truly transformative change, such as automatic enrollment and default investments such as target-date funds, took years to germinate before legislative action, in the form of the Pension Protection Act, provided the clarity that gave their adoption a needed jump start.

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Topics: Auto Portability, Safe Harbor IRA, Automatic Rollovers, Cash Outs, America's Mobile Workforce, Boston Research Technologies, Automatic Rollover, auto portability simulation

What you won’t hear in commencement addresses

Posted by Neal Ringquist on May 9, 2016 3:47:47 PM

In his May 9th article in MarketWatch’s Retirement Mentors blog, RCH President & CEO Spencer Williams offers sage advice to college graduates as they enter the workforce:  consolidate your retirement savings! 

Citing job-changing statistics from EBRI, as well as the poor decisions made to cash out or strand retirement savings.  Williams also points to a 2015 study of mobile workforce behaviors, conducted by Boston Research Technologies, which found that 32.8% of workers left behind their retirement savings in their most recent, former employer’s plan, despite the fact that almost 98% of plans are able to accept roll-ins from other plans.

College graduates will learn the value of a dollar soon enough, says Williams, who advises these new savers to begin saving early, often – and, when changing jobs -- to move their retirement savings forward to their current employer’s plan.

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Topics: 401(k) Consolidation, America's Mobile Workforce, Boston Research Technologies

Roll-In Services are a Slam Dunk for Sponsors & Participants

Posted by Neal Ringquist on Apr 4, 2016 3:12:48 PM

In his April 1st, 2016 article in MarketWatch, RCH’s CEO Spencer Williams describes the sting that retirement savers feel -- not once, but twice -- when they choose to cash out their 401(k) savings.


To Illustrate his point, Williams cites a 2014 Fidelity Investments report calculating the impact on a 30-year-old who elects to cash out a $16,000 401(k) account, forgoing more than $145,000 in retirement savings! To add insult to injury, that same person wouldn’t actually receive the entire $16,000 sum – taxes and early withdrawal penalties will take another $4,800 right off the top!


While leaving hard-earned savings behind is certainly a better choice than cashing out, participants will still lose money over the long-term by paying administrative fees for each account remaining open. Williams advises participants to consolidate their old accounts through roll-ins, adding that many plans will offer their participants roll-in assistance, overcoming the perception that the roll-in process could take too much time to complete.


Read the full MarketWatch article here.

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Topics: 401(k) Consolidation, Roll-In, America's Mobile Workforce

Washington Recognizes Need for Retirement Plan Portability Solutions

Posted by Neal Ringquist on Jan 13, 2016 4:08:47 PM


Clearly, Washington DC is now “getting it” when it comes to retirement plan portability. 


In November 2015, Senator Patty Murray and other influential members of Congress delivered a letter to Department of Labor Secretary Perez urging action on Auto Portability.   Now, we have strong comments from President Obama in his final State Of The Union address on the need for more portable retirement savings.


It seems that Washington now clearly understands the frictions associated with retirement savings under the current retirement system.  They further realize that Auto Portability – a private sector solution – can plug leakage (cash outs and unnecessary fees), allowing retirement savings to move forward along with a mobile workforce, while promoting lifetime participation in retirement plans.


The Building Momentum for Retirement Plan Portability


The momentum towards portability has been steadily building.   In 2009, the U.S. Government Accountability Office (GAO) published 401(k) Plans: Policy Changes Could Reduce the Long-term Effects of Leakage on Worker’s Retirement Savings  which highlighted, perhaps for the first time, the devastating impact of cash out leakage on the retirement readiness of 401(k) plan participants.  Subsequent research reports published by Aon Hewitt, Vanguard and Fidelity were all consistent with the findings in the GAO report.  


Most recently, a Retirement Clearinghouse/Boston Research Technologies Mobile Workforce study completed in 2015 examined the distribution decisions of 401(k) plan participants, firmly establishing the linkage between frictions associated with retirement account portability and adverse participant behavior upon job change, such as cash outs and stranded accounts. 

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Topics: Auto Portability, Leakage, America's Mobile Workforce, Retirement Plan Portability

As 401(k) Cash Out Leakage Grows, So Does Need for Auto Portability

Posted by Neal Ringquist on Dec 15, 2015 11:32:38 AM

In his December 11th article in BenefitsPro (Addressing the Critical Problem of 401(k) Cash Outs), Nick Thornton draws much-needed attention to the magnitude of the 401(k) cash out leakage issue, due to the frictions associated with account portability when plan participants switch jobs. Thornton’s article rightly emphasizes the need for automated portability – similar to automatic enrollment and deferral increases - to effectively address the cash out problem. 


Let’s examine the leakage problem in more detail.

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Topics: Auto Portability, Cash Outs, Lifetime Plan Participation, Leakage, America's Mobile Workforce, Auto Enrollment, Boston Research Technologies

Boomers: Consolidate Your Retirement Accounts Immediately!

Posted by Neal Ringquist on Nov 16, 2015 2:18:39 PM


In his 11/16/15 MarketWatch article Boomers need to consolidate retirement accounts immediately RCH President & CEO J. Spencer Williams notes that the baby boomer generation, which is closest to retirement age, stands to benefit the most from consolidating their retirement savings, vs. leaving their accounts behind at former employers.


Citing research conducted by Boston Research Technologies on America’s Mobile Workforce, Williams notes that while 50.3% of boomers indicate that they’ve left behind a 401(k) savings account at least once when changing jobs, their generation is less-likely than millennials or Gen-Xers to take advantage of a plan roll-in service, if offered by their employer.  


To overcome the resistance, Williams gives some practical advice to get started, and using a travel analogy, advises boomers to get “their bags packed and their boarding passes ready” by moving their retirement savings forward.

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Topics: 401(k) Consolidation, Managed Portability, Roll-In, America's Mobile Workforce, Boston Research Technologies

Portability and the Mobile Work Force Webcast Recap

Posted by Kristen Miller on May 28, 2015 9:06:00 AM

How Job Changing Impacts Retirement Savings 



In conjunction with Boston Research Technologies, RCH announced the findings of a groundbreaking research study on America’s mobile workforce, providing insights into participant behaviors regarding retirement savings portability. The study offers plan sponsors with strategies to stem cashouts and to improve retirement outcomes. On May 28th, RCH and Boston Research Technologies teamed with PLANSPONSOR to deliver a webcast, where attendees were presented the study’s key findings, implications and action items.

Key points discussed:
  • A majority of participants base their distribution choice at the time of job change on convenience and thereby harm their retirement readiness.
  • Participants are overwhelmingly receptive to using their qualified plan as their primary retirement account during their working careers, and rate employer-sponsored roll-in services as an excellent and valuable benefit.
  • Portability solutions are needed to make in-plan consolidation the default option for those segments of the participant population that are uncertain about their distribution decision.
  • Every plan sponsor can benefit from this research!
If you missed the PLANSPONSOR webcast, you can now watch the replay below, view the presentation slides and download the Executive Summary of the research findings. 


Transciption of Webcast:

Alison Cooke Mintzer (ACM): Good morning, good afternoon everyone this is Alison Cooke Mintzer. I’m editor and chief of PLANSPONSOR and Plan Advisor and I’m pleased to be your host and moderator for today’s webcast titled, Actionable Insights for Your Mobile Workforce: Portability Solutions Key to Improving Retirement Outcomes. We’ve got a great presentation for you today and I’m really excited about it. I of course want to thank Retirement Clearinghouse for making today’s presentation possible for all of you. Before we get started and I introduce today’s speakers, I’d like to take a moment, if I can, to go through a couple of house-keeping items. First, we will be taking Q&A at the end of the session and so if you’d like to ask us a question, please feel free to do so using that lower little box you see on the lower right hand side of your screen, titled Q&A. You can write your questions in it anytime and we’ll cue them up for the end.


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Topics: Auto Portability, Automatic Rollovers, PLANSPONSOR, Managed Portability, Webcast, America's Mobile Workforce

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