Although defined contribution plan recordkeepers and sponsors have made considerable progress helping participants retain savings through reduced fees over the past decade, job-changing participants’ 401(k) savings account balances remain in a state of dangerous limbo, as participants often succumb to the temptation of cashing out. EBRI reports that at least 4.5 million—or 40%—of job-changing participants cash out $92.4 billion in 401(k) savings from the U.S. retirement system every year.
The Employee Benefit Research Institute (EBRI) estimates that the average American worker will change employers 9.9 times over a 45-year working career. But despite the high mobility of the modern workforce, the lack of seamless plan-to-plan asset portability prevents participants from easily moving and consolidating their 401(k) savings at the time of a job change. This leaves participants open to the temptation to prematurely cash out their 401(k) accounts from prior employers’ plans.
