Presumably if you’re working with retirement plans you have the good sense to participate in your employer’s retirement plan. But what do NAPA Net readers do with their retirement account(s) when they change employers?
Among the respondents to this week’s reader poll, more than one in five (21.4%) have had six or more employers, and a quarter (each) have had either four or five, while roughly 11% had had six. The rest have had between two and three.
So, with that kind of turnover, how many retirement accounts do they have today? Perhaps not surprisingly, “one” was not the most common response – though just over 14% fell in that category. The most common response was the 46% who had two accounts, with the third that had three accounts just behind. The remainder was split between those with four accounts – and those with more than six.
More or Less?
Now, for most of this week’s respondents (46%) that was “a few less” than the employers they had worked for, and for most of the rest (43%) it was “a lot less” (for the rest it was “the same”). What that means, of course, is that just under 40% had rolled over all their balances, but more than half (54%) had not rolled over all of them. The remaining 6%? They had rolled over none.
“I have more retirement accounts, because I contributed to some IRAs separately from my employer-sponsored plans,” explained one. “I only have my current employer's 401(k), and an IRA & Roth IRA with previous employer rollovers in it,” noted another.
“Of my three accounts, one is an IRA rollover account comprising of all former employer plans, the 2nd is my Roth IRA, and the 3rd is my 401(k) with my current employer,” commented another.
As for why they hadn’t rolled over these accounts, respondents noted:
60% - liked the plan/fees/investments they were in
20% - just never got around to it
13% - spent it instead
13% - too lazy
7% - too busy
7% - couldn't roll it into new employer plan
7% - wanted to keep control
7% - didn't want to be out of the market
7% - just way too frigging complicated to roll over
Among the other options/paths cited were: consolidated former employers into an IRA and an annuity with an outside advisor while participating in my current employer's plan, paid off debt or, as one respondent noted, “I’m in the business — I keep the accounts for ‘competitive intelligence’ purposes!”
Fiduciary Impact
Beyond NAPA Net readers’ own actions, we asked what impact, if any, the fiduciary regulation might have on rollovers. Just over half (54%) said it would result in fewer rollovers, though 14% thought it would trigger an increase there. One in 10 didn’t think it would have any impact, while the remaining 22% admitted they “had no earthly idea.”
“It is in the best interest of participants (and their future beneficiaries) to offer them the opportunity to roll over and consolidate to be able to more easily track what they have,” noted one reader. “At the very least to make them aware that they can keep the funds with prior plans but they must be diligent in tracking and letting beneficiaries know where the money is.”
“I think the participants who will most need the advice and guidance on rollovers will not get it under the new DOL rule,” noted another. “The new rule will cause companies and the advisors they employ to look first at the company risk, then determine if the participant is worthy of the advice. Not good for either side!”
“I don't think that the majority of the population understand the costs associated with a retirement plan,” commented another. “Sure there is fee disclosure, but it is not truly meaningful to the individual since they would have to do some research, access their account statement and fee disclosure and do some math and then try to compare that to their other choices. It is labor intensive, not straight forward and frankly work that most people would not find ‘fun.’ As the boomers enter retirement, many will be overwhelmed by the choices they may have for the little bit of money that may have saved and the onerous debt burden that they still carry.” Another reader observed, “I believe there will be less financial advisors who will want to get involved with helping plan participants rollover assets to an IRA, given the DOL fiduciary regulations.”
Other Comments
As for general reader comments, we got quite a few. Here’s a sampling:
“It is much harder than it should be to roll over from one employer-sponsored plan to another. People have been trying to fix this since at least TRA 1997, but no one has picked up the ball and run with it through a combined regulatory and technological solution. However, ACATS could do it if they had the support from DOL, Treasury and the industry.”
“Regulations + financial services industry = loads of rules and jargon; caveat emptor,” opined another.
“My first real job out of college didn’t offer a retirement plan. Then at my second job, I was only in their plan for maybe six months before I moved out of state. I rolled my meager balance into my new employer’s plan in 1993. When I moved to MI in 2000 I rolled that balance to Vanguard, and I have been with my current (4th) employer ever since. So you’d think I would only have two retirement accounts: The IRA and my current one. But no, I have three because we have two plans here. Our money purchase and our 401(k). Being a TPA, it doesn’t ‘cost’ us anything to maintain the two separate plans, so we haven't merged them as we have encouraged all of our clients to do.”
“Apparently we all have to accept that we’re all fiduciaries no matter what we say or do, and that we can no longer be paid for anything as that would represent a conflict of interest. For example, I can recommend the honeydews to another patron at the grocery store because I make no profit. So even though I have now become a fiduciary with regard to that honeydew, there won't be a prohibited transaction. But the actual produce manager may not make that same recommendation without recourse. And if my nephew starts working as a bagger, then what???”
Thanks to everyone who participated in our weekly NAPA Net reader poll!
Got a question you’d like to pose to the readership? Want to get a sense of the industry’s view? Post your question in the comments section below, or email me ([email protected]).
