Nevin's Data "Points"

   There’s a “new” retirement crisis to fret about — and it involves so-called “junk” IRAs. You may have seen the recent Wall Street Journal’s headline that proclaimed “ Forgotten 401(k) Accounts Are Costing Americans Billions in Lost Investment Gains .” This particular assertion turns out to be another spurred by (yet another) proclamation from an IRA provider (PensionBee), though this one at least doesn’t manufacture quite as ludicrous a compounding of the size and number of those accounts as others [i]  have done. More precisely, the issue they raise is that smaller retirement plan balances can, and often are, legally expunged from the plan of their prior employer into an IRA.   Now, retirement plan professionals know how this works — those who sever (or who are severed from) employment with less than a $1,000 balance will likely have that distributed to them in cash, those with balances above $7,000 [ii]  will generally have the option to leave that bal...

  Changing jobs can be a time of great energy and excitement — but if you’re not attentive, it can also undermine your retirement security. Here are five ways it can do so. Cashing It Out Probably the biggest job change risk to retirement security is the rollover decision. Generally speaking, most with balances less than $1,000 are automatically issued a check of their savings minus income tax and 10% penalties, those with between $1,000 and $7,000 are given two other options to cashing out: to roll over assets into a qualified IRA or to transfer to a new employer’s plan, while those with balances over $7,000 also have the option to leave their account with that old employer plan. As you might expect, smaller balances are not only the most likely to be those of lower income individuals, but they also tend to be lower tenured and are more likely to be women. Oh — and if that individual has an outstanding loan? Well, that’s where the real “leakage” occurs. Remembering of course that...

  There was some good news — and some disappointing news — about the take-up of a “new” plan design last week. It was the first anniversary of a coalition of recordkeepers called the  Portable Services Network  (PSN) — a consortium of firms that includes Alight, Vanguard, Fidelity Investments, Empower, TIAA and Principal — not to mention the Retirement Clearinghouse, whose  long-term patience  and commitment made the concept of auto-portability a reality. There’s even  support for auto-portability  in SECURE 2.0.      The Good News The good news: PSN reported that in its first year of operation — more than 15,000 plans representing approximately 5 million participants have signed up for auto portability. According to a press release, 549 auto portability transactions have been completed as of Dec. 1, 2024; and 7,841 auto portability transactions are “in motion” as of Dec. 1, 2024. In-motion transactions are those where the Retiremen...

  Editor’s Note: To his credit, Shlomo Benartzi took the time to respond to my recent  column  on his Wall Street Journal op-ed on LinkedIn (you can read it  here ) — though to my read, the concerns expressed on where such a proposal could lead remain. Consider this a brief follow-up.      Shlomo, Whew! I can’t tell you how relieved I am/was to have you clarify that you are NOT advocating a government-run retirement plan system. I guess you referring to three specific government-run systems as models to be considered persuaded me that you thought those were good examples for us. You’ve  now  pointed more specifically to the Australian model where “workers remain by default with their first plan provider, even if they change jobs.” But as I am sure you know, there are some significant differences between that system and ours — differences that, to my eye, wind up being significant.  First and foremost , that system is funded primarily by ...