Every year, our nation’s retirement system loses $92 billion in savings because 401(k) plan participants prematurely cash out their accounts when they change jobs. This is the most recent estimate from the Employee Benefit Research Institute (EBRI), and while this finding affects all American workers, minorities are hit hardest.
 

At Retirement Clearinghouse (RCH), we’re excited about the 2020 prospects for auto portability.  Before we’re too far into a new decade, we wanted to pause, take a breath and share with you some highlights from 2019, a year that’s positioned the newest automatic, default plan feature for widespread adoption.
 

Although the financial wellness of employees has emerged as a top priority for employers in recent years, too many workers are still struggling to improve their financial health.

Much has been written in the media, including this column, about the increase in mobility of today’s American workforce.

Fifteen years ago, when safe-harbor IRAs were first proposed as a destination for small, stranded 401(k) accounts that can be automatically rolled out of plans, then-U.S. Assistant Secretary of Labor Ann L. Combs spelled out what these investment vehicles were supposed to accomplish.

401(k) account cash-outs remain a potent threat to Americans’ retirement-readiness and by all accounts the U.S. Department of Labor agrees, having issued its final Prohibited Transaction Exemption (PTE) for auto portability at the end of July.

Cashout leakage, a long-standing problem in America’s defined contribution system, is a silent crisis that unnecessarily robs millions of Americans of a comfortable, timely or secure retirement.  Plagued by misunderstanding and neglect, it’s vitally important to understand the problem and to take decisive action to curb it.  The third of a five-part series, this article addresses the magnitude of the 401(k) cashout leakage problem.