Rollover Rationale: Consolidation, Convenience

More than $400 billion is rolled over from DC plans – but most of that isn’t going to the current plan provider.

While 8 in 10 DC plan participants who roll their assets into an IRA speak to someone before doing so, just over half (58%) of these people rely on a financial professional when making this decision, according to a new LIMRA Secure Retirement Institute study.

The top reasons plan participants gave for rolling over their DC assets into an IRA are:

  • to gain more control over their assets;
  • to access better investment options to achieve better returns; and
  • to consolidate their portfolio.

According to the survey, among all workers age 40-75, about 11% rolled money from their DC plan into a traditional IRA within the past two years. People age 60-64 with income of $100,000 to $249,999 were most likely to move their DC plan assets into an IRA.

One third of participants said they had other accounts with the retail provider they had chosen to rollover their DC assets, and another third said it’s more convenient to do business with their chosen IRA provider. This motivation is more pronounced among those with more than $1 million in household assets, as nearly half (46%) cite consolidation as their reason to move their assets.

Relationships Rationale

Whether or not a plan participant keeps their assets with the plan provider or moves it to another retail IRA provider often depends on the strength of the relationship with the plan provider. Only 11% of participants said they had a strong relationship with their plan provider before leaving their employer, according to the report.

The study found that about half (54%) of those rolling over assets start thinking about the decisions 90 days or more before leaving their employer. However, the report’s authors note that in general, plan providers do not know in advance that a participant is leaving his or her employer. Institute research finds retention rates are highest among younger participants, wealthier participants and participants who had formed a strong relationship with their plan providers before leaving their employers.

Provider Picks

The top three factors participants considered when considering a company were:

  • reputation (47%);
  • recommendation by friends, family or co-workers (33%); and
  • relationship – when a participant already has an account or products with the company (28%).

A list of companies that captured the most rollovers is available here.

LIMRA Secure Retirement Institute conducted the survey in the fall of 2016. More than 2,500 U.S. consumers ages 30-75 who were involved in the household’s financial decisions participated.

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