Tom HawkinsÂ is vice president of sales and marketing withÂ Retirement Clearinghouse, andÂ oversees all key operational aspects of this area, including RCHâs web presence, digital marketing and plan sponsor proposals.
Chart 1 â Womenâs Odds of Cashing Out Small Balances Source: Actionable Insights for Americaâs Mobile Work Force, Boston Research Technologies (2015)
The Promise of Portability
A more promising data point was revealed in a 2011 study by Aon Hewitt, indicating that women â at higher balance levels â were more likely than their male counterparts to preserve their retirement savings from job-to-job.Â This finding seems to mirror other research (ex.In other roles for RCH, Hawkins has performed product development, helped lead the companyâs re-branding, evaluated and organized industry data and makes significant contributions to RCH thought leadership positions.[Is My On Cash Handle To Be Flow A Why This Hard It Should Easier Get So Surely]
Compiled by Retirement Clearinghouse (RCH) and presented to the WISER roundtable by RCH EVP Tom Johnson, the data indicates that women with small 401(k) balances cash out much more frequently than their male counterparts.Â However, as womenâs 401(k) balances grow, they become more likely than men to preserve their retirement savings.
These behaviors, along with the results of the Auto Portability Simulation, suggest that a program of retirement savings portability could incubate womenâs small 401(k) balances, allowing them to more effectively grow their savings to higher balance levels, where more virtuous behaviors prevail.[Attend You Wedding Know To Much Spent Youve A Do]
Guest author:Â Tom Hawkins, vice president of sales and marketing withÂ Retirement Clearinghouse
At a recentÂ Womenâs Institute for a Secure Retirement (WISER) roundtable addressing strategies, choices and decisions for womenâs retirement income, important new data was presented that highlights the challenges faced by women in preserving their 401(k) savings when changing jobs â particularly for women with balances less than $5,000.
Womenâs Cashout Leakage By-the-Numbers
Using a multi-disciplinary approach that incorporated industry research on cashout leakage, womenâs representation in defined contribution plans, participant turnover rates, the Auto Portability Simulation, the EBRI/ICI 401(k) database and the EBRI Retirement Security Projection ModelÂ®, the results provide a model of women participantsâ post-separation job-changing and cashout behaviors.[Invest R500 Or You What Can In Is This Less Got]
Based on Vanguard research, women collectively represent about 40% of all defined contribution plan participants.
Each year, an estimated 5.9 million women participants will change jobs.
Of these 5.9 million women job-changers, approximately 2.4 million, or 41% will cash out $28 billion in retirement savings, paying taxes and penalties.
2.1 million, or 36% will have balances less than $5,000.
Drawing upon a 2015 survey by Boston Research Technologies, the RCH data also revealed that, at sub-$5,000 levels, women of all ages tended to cash out at much higher-levels than their male counterparts, as indicated in the graph below.[Points AF My Score 038 Credit Happy Im Dropped 47]
Incorporating the results of the Auto Portability Simulation, the RCH figures show that, on an annual basis, auto portability would preserve the savings of 1 million women participants.Â Over a generation, 42 million women would preserve their retirement savings, worth about $365 billion in todayâs dollars..â The $10,000 Hurdle, Northern Trust, 2017) suggesting that efforts to move participantsâ balances to higher thresholds can act as an effective deterrent to cash outs.[Talking Friends Should You Money Why About Be Your To]
In preserving and incubating womenâs small 401(k) balances, auto portability delivers.
An infographic summarizing the statistics is available for download at this link.[Consider Heres Should Your Before What You You File Taxes]
The RCH analysis depicts the individual impact of preserving 1-3 $5,000 balances over the course of a career.Â As the figure shows below, preserving just one $5,000 balance at age 25 can result in $70,000 in retirement savings, whereas three $5,000 balances preserved over the course of a career could result in an additional $123,600 in retirement savings.
Figure 1 â Value of Preserving $5,000 Source: Retirement Clearinghouse
Taken together, the new data presented at the WISER roundtable demonstrate that by reducing cashouts, consolidating balances and achieving higher balance levels, women could benefit disproportionately from the widespread adoption of auto portability.[B Special Enrollment Approaching Deadline Its Not Too Part Late Medicare]
While the systemic results of auto portability are impressive, its effect at an individual level is equally impactful.