In his latest MarketWatch RetireMentors column, RCH CEO Spencer Williams modifies the familiar proverb “a stitch in time saves nine” for the benefit of 401(k) savers who have multiple retirement savings accounts. A roll-in becomes the equivalent of the stitch, saving participants considerable time and money as they change jobs.
As the original proverb suggests, Williams argues that savers are much better-off consolidating their balances at each job change, vs. waiting until retirement to do so.
Williams backs up his advice with plenty of facts.
The Employee Benefit Research Institute (EBRI) estimates that the average American will change jobs over seven times in a 40-year career. Using figures obtained from a study of mobile workforce behaviors, Williams calculates that waiting to perform seven roll-ins at retirement age would take between 35 and 42 weeks of effort.
To make matters worse, unconsolidated accounts lose a substantial amount in fees and compounded interest. For example, an account stranded at age 30 would lose an estimated $6,708.54 in fees and compounded interest by age 65.
Finally, applying the “time is money” theory, Williams asserts that $100 to $500 of personal time spent rolling in balances now is much better than spending $700 to $3500 at age 65.
In addition to their virtues of saving time and money, roll-ins reduce the risk of losing your savings. Savers who’ve stranded accounts with less than $5,000 may be subject to being forced out of their plan and into a safe-harbor IRA, or worse – find themselves facing an involuntary cash-out if their balance is less than $1,000.
With one in six Americans relocating in any given year, the chances of these small, stranded accounts “going missing” can skyrocket.
As Williams so aptly demonstrates, a “roll-in in time” will save you far more than nine when you’re ready to retire.