Making Your Day, Re-Visited: When Retirement Savers’ Luck Runs Out

In his most recent article in MarketWatch, "Are you still feeling luck, 401(k) saver?" RCH’s Spencer Williams reprises last year’s 7/10/15 article where he channeled Clint Eastwood’s iconic movie hero “Dirty Harry” Callahan. Just like the movie villains whose luck ran out at the hands of Dirty Harry, retirement savers who strand their 401(k) accounts must run a gauntlet of decidedly unlucky outcomes – including involuntary cashouts, automatic rollovers and savings-depleting fees.

Unlike Dirty Harry’s foes, retirement savers have a shot at redemption, by rolling their hard-earned savings in to their next employer’s plan. According to the most recent PSCA annual survey of plan sponsors, almost 98% of plans allow roll-ins from other plans, almost 62% from IRAs. However, for those unfortunates who live dangerously and strand their savings, they can take cold comfort in the knowledge that their former employer could face higher fines for failing to keep their contact details up-to-date. For those savers that stranded accounts with less than a $5,000 balance, this means their former employer has even more motivation to force those accounts out of the plan and into safe harbor IRAs with the savings-depleting combination of high fees and low returns.