It’s no secret that interest rates have been at historically low levels for quite some time, but the recent announcement by Federal Reserve Chairman Jerome Powell indicates that rates will stay near zero for the foreseeable future. Chairman Powell stated in his address last month that the Fed would tolerate above-2% inflation instead of attempting to preemptively control inflation by raising interest rates.
Consolidation Corner Blog
Consolidation Corner is the Retirement Clearinghouse (RCH) blog, and features the latest articles and bylines from our executives, addressing important retirement savings portability topics.
Researchers realize that long-term retirement planning is not a natural act for most 401(k) plan participants. Consequently, important 401(k) plan features have evolved (ex. – auto enrollment, auto escalation, QDIA funds, etc.) to overcome the mis-match and to promote saving for retirement. Many of these features work spectacularly well – but only for as long as participants are actively participating in that plan.
It’s bad enough that more than 50 million Americans have filed claims for unemployment benefits since the start of the COVID-19 pandemic and lockdown. But in addition to the disruption, financial hardship, and uncertainty that unemployed Americans (and their families) are experiencing right now, this crisis also threatens their financial security during retirement.
The COVID-19 crisis has created a situation where tens of millions of American workers are in danger of seeing their retirement savings depleted. In addition to the awful death toll, the COVID-19 outbreak has led to extreme disruption in daily life, financial markets, and the economy—especially employment. As of May 28, more than 40 million Americans filed claims for unemployment benefits in the previous 10 weeks. This deadly combination of 1) levels of unemployment not seen since the Great Depression, 2) a significant market downturn, and 3) the ongoing plan-to-plan portability gap, has serious implications for these Americans’ retirement outcomes.
Increasingly, 401(k) plans have become more-and-more “institutionalized” – reflected by an increased level of sophistication in investment options, coupled with a downward trend in fees.
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.
In this series, I identify five key reasons why an auto portability program serves the best interests of plan participants.
Previously, in Part 1, I examined the dramatically improved participant outcomes that will result from a program of auto portability.
In Part 2, I describe how auto portability, by enhancing and extending automatic rollover programs, represents an enhanced standard of care for participants.
With the announcement of the Department of Labor’s recent actions, auto portability has taken center stage in the retirement industry. While auto portability has been well-known to a relatively small group of industry insiders, its recent, widespread coverage in the media has many asking the question “what is auto portability?”
With so many different -- and important -- perspectives on the matter, the best answer will depend on who’s asking the question.
Plan sponsors intuitively know that an explosion of small-balance 401(k) accounts held by terminated participants can create problems. Unfortunately, few sponsors are clear on the factors that give rise to small accounts, and fewer still understand how they can utilize consolidation programs to solve the problem.
On May 22nd, at a Women’s Institute for a Secure Retirement (WISER) roundtable addressing strategies, choices and decisions for women’s retirement income, important new data was presented that highlights the challenges faced by women in preserving their 401(k) savings when changing jobs – particularly for women with balances less than $5,000.