Consolidation: The Missing Piece of the Retirement Game Plan

By Thomas Hawkins | July 27, 2015

Today, it’s a commonly-accepted practice for plan sponsors to focus on three major initiatives in order to promote retirement adequacy: participation, saving and diversification. While these concepts are proven, the emerging best practice is to incorporate the principle of consolidation, so that plan sponsors will begin to focus on participation, consolidation, saving and diversification.

Why?  Because the American worker is highly-mobile, changing jobs over seven times in a career, and relocating once every 7 years, on average. These facts, combined with “do-it-yourself” portability, results in the proliferation of stranded retirement savings accounts – or, worse – unnecessary cash outs. 

The benefits of consolidation are real and they’re proven. As evidence, recent leakage/cash out studies by the GAO, Aon Hewitt and Fidelity all point to a correlation between account balance and cash out rates:  the higher the retirement account balance, the lower the cash out rate.  

For plan sponsors, promoting consolidation into the active plan (roll-in) is a cost-effective way to increase participants’ average account balances and reduce the incidence of stranded accounts and cash outs

For participants, combining those stranded accounts in a single retirement account allows for more effective management of retirement savings and reduces their likelihood of cashing out, thereby leaving more savings to grow tax deferred. For participants in large employer-sponsored plans, the active 401(k) account is often the preferred option, due to lower fees and access to cost-effective advice and guidance.

Will plan participants take advantage of a consolidation program? The answer is a resounding “yes.”  Most recently, a study of the mobile workforce (summary, detail) by Boston Research Technologies reveals that plan participants across all age groups overwhelmingly want to use their employer-sponsored plan as a consolidation vehicle for their retirement savings, and would take advantage of a program that made the consolidation process easier.

Contact RCH at (866) 827-9608, or e-mail us at to start making consolidation a part of your game plan.