Proof Positive: Retirement Savings Portability Works

For almost two decades, industry analysts, policymakers, and retirement advocates have warned about the corrosive effects of 401(k) cashout leakage. Every year, billions of dollars that should remain invested for retirement instead vanish from the system when participants change jobs.

Each year, about four in ten participants changing jobs will cash out all or part of their 401(k) savings. According to EBRI estimates, this translates into $92 billion annually in lost retirement savings. When multiplied over decades, the leakage problem threatens to undermine the very system designed to deliver financial security in retirement.

We’ve long known – through models and projections – that portability, particularly auto portability, has the potential to significantly reduce this leakage. The EBRI Retirement Security Projection Model (RSPM) and the Retirement Clearinghouse Auto Portability Simulation Model both confirm that giving participants a safe, simple, and automatic path to move their retirement savings forward can preserve trillions in long-term savings.

But models, however sophisticated they may be, can be inherently less convincing than hard, empirical data.

For the skeptics and naysayers who doubt the power of portability in preserving retirement savings, I present definitive, real-world empirical data proving that portability not only works – it works at scale – and will deliver consistent results over many years and for millions of job-changing participants.

Proof Point #1: Boston Research Group (2013)
In 2013, the Boston Research Group (BRG) released the first-of-its-kind case study examining the experience of a very large plan sponsor that implemented a program of retirement savings portability. This employer’s plan served more than 190,000 participants and offered them systematic ways to move their 401(k) balances forward when changing jobs, regardless of whether they were newly hired or separated.

The results were eye-opening. Over a 6-year period (2007-2012), BRG documented that cashout leakage at this sponsor was reduced by over 50% across all balance segments, compared to the previous 5-year period (2002-2006), when no portability programs were in place.

Some of the most striking findings included:

• Dramatic reductions in leakage for participants with small balances (under $5,000), who are traditionally the most vulnerable to cashouts.
• Sustained reductions across every balance level, proving that portability helps not only those with modest savings but also mid- and higher-balance participants.
• Evidence that participants respond to an easy, guided path for keeping their retirement money invested.
  
  

The BRG case study (link here) was the first to provide hard, empirical validation that portability works in practice – not just in theory.

Proof Point #2: Retirement Clearinghouse Study (2021)
In March 2021, Retirement Clearinghouse (RCH) published an updated analysis of the same large plan sponsor, extending the data to incorporate the 8 years between 2013-2020, as the plan’s participant base grew to over 250,000 participants. These additional years of empirical data expanded the overall dataset to encompass 14 years of real-world experience with retirement savings portability.

The study, The Ongoing Impact of Retirement Savings Portability, confirmed and strengthened the findings of the BRG report.

Key takeaways included:

• Cashout leakage remained more than 50% lower than what would have occurred without portability.
• The reductions in cashout leakage observed in the original BRG study were not only maintained, they were further reduced during the 2013-2020 timeframe, validating that a program of portability is not a one-time effect but an enduring solution.
• The benefits were realized across all participant demographics and balance tiers, underscoring the universality of the portability solution.
• The plan realized significant benefits, including higher average balances, fewer “stranded” accounts and a reduced incidence of missing participants.
  
  

The full report provides extensive data tables and comparisons, but the conclusion is unmistakable: portability works, and it works over the long haul.

Why This Matters for Auto Portability
Both the BRG and RCH studies are significant because they document real, observable outcomes. Together, they form a solid empirical foundation for the case that portability, when delivered at the time of a job change, dramatically reduces cashout leakage.

This evidence is especially important for auto portability, which extends the portability solution to the most vulnerable group of participants: those with account balances under $7,000. These participants, who change jobs frequently, are the most likely to be automatically cashed out or to cash out voluntarily when faced with job transition frictions.

Auto portability solves this problem by making the process automatic, seamless, and friction-free: when a participant with a small balance changes jobs, their savings follow them automatically into their new employer’s plan, unless they opt out.

The empirical data from the large plan sponsor case studies show us exactly what to expect systemically: reductions of more than 50% in cashout leakage. That’s not theory – it’s proof.

For policymakers, plan sponsors, recordkeepers, and retirement advocates, the message is clear:

• Portability is no longer a nice-to-have; it is essential.
• Auto portability offers a scalable, systemic solution that directly addresses the leakage problem where it is most severe.
• The time to act is now.
  
  

Proof Matters
In the world of retirement policy, proof points matter. The BRG (2013) and RCH (2021) studies show, conclusively, that portability – delivered at the point of job change – cuts 401(k) cashout leakage in half.

This is not theory…this is fact. And it is precisely why auto portability is the right solution, at the right time, for America’s retirement system.