To better support retirement savers, Vanguard and the Retirement Clearinghouse (RCH) announced that they are expanding their relationship to include services to individual retirement account (IRA) holders.
According to the announcement, the expanded collaboration by the two firms will help reconnect IRA holders with retirement funds they may have lost or forgotten. The consolidation of these accounts, which are often left behind when employees change jobs, will help IRA holders preserve and maximize retirement assets.
The initiative extends the existing relationship with RCH, which launched in 2021, as the two companies have collaborated to prepare an auto-portability service to 401(k) plan sponsors and their participants. “We will now be working to help investors reconnect with small balance rollover IRAs they may have lost track of,” Vanguard stated in a blog post.
“Retirement Clearinghouse and Vanguard share the same mission to improve the retirement outcomes of under-saved and underserved participants by reducing cash out leakage though a program of facilitated consolidation of stranded or forgotten 401(k) accounts. Expanding our partnership to also include forgotten IRA accounts is natural extension of that mission,” Retirement Clearinghouse President and CEO Spencer Williams explained in an emailed response to NAPA.
Indeed, retirement accounts are sometimes left behind during a career transition or when a saver mistakenly feels an account is too small to be impactful toward their retirement goals. “Consolidating these funds can make it easier to keep track of retirement savings and tap the power of long-term investment returns, ultimately putting savers on their best path to investment success,” the announcement notes.
Investors can also forget to make decisions about how to invest the rolled over amounts, often leaving assets sitting in low-yielding cash equivalents not aligned to a retirement objective.
“Because saving for retirement is the primary goal for many investors, an IRA account that's not properly invested or accounted for can be disappointing for the account owner, and this disappointment may lead to cashouts and forfeiture of future savings and returns,” Vanguard explains. As such, it's important when such a rollover occurs, to consider the fees and make sure the investment options are suitable to meet the long-term goals of the retirement saver, the firm adds.
Among other things, RCH has been an IRA administrator since 2007 and specializes in helping IRA holders determine which options are best for them, including whether to:
- Roll their IRA into their current employer's retirement plan if their current plan allows;
- Consolidate their IRA into another existing IRA; or
- Keep their savings in their existing IRA.
In certain instances, Vanguard will now be sending select small-balance IRAs on its platform to RCH to facilitate investors reconnecting with their money.
RCH notes that its portability solutions have been proven to cut cash-outs by over 50% and significantly increase average account balances. Originally established as RolloverSystems in 2001, the Charlotte, N.C.-based RCH works with more than 36,000 retirement plans and has helped guide over 1.9 million plan participants with more than $29 billion in retirement savings.
Meanwhile, with this latest announcement, the movement to auto-portability continues to grow. In early July, the Principal Financial Group announced that it will join the Portability Services Network (PSN) alongside TIAA, Empower, Fidelity, Vanguard, and Alight at the Retirement Clearinghouse-backed initiative.
PSN utilizes the RCH auto portability solution to deliver a nationwide, digital hub connecting workplace retirement plan recordkeepers and the plan sponsors they serve that elect the auto portability service.
And while the expanded IRA partnership involves Vanguard IRA account holders only, Williams notes that “Retirement Clearinghouse is certainly amenable to similarly structured relationships with other mission-aligned IRA providers.”
