What do people do with the money in their DC plan when they leave their employer? According to EBRI research, most people leave it where it is for a number of reasons — especially whether they intend to retire or keep working. About one in four choose the rollover option; 17.5% withdraw the savings; and just 0.5% transfer it into their new employer’s plan. Though it may be appealing to draw conclusions about participant behavior, EBRI researcher Sudipto Banerjee cautions that the actions may just be a result of inertia.
Among people 50 or older, most leave the money if they plan to continue working, while most take the money if they intend to retire. People with higher account balances, income and wealth are less likely to cash out, as are those who have an IRA or lower debt.
While rollovers are common, will the proposed DOL fiduciary rule — now slated for release in January 2015 — limit that option, since fewer advisors will be willing to take on fiduciary liability for smaller IRAs? What effect will FINRA’s notice on the suitability of rolling over DC assets into an IRA have? And if more people are leaving their money in their employer’s plan (and average job tenure dropping from 15 years to 10 years over the past two decades) but less than 1% are transferring the money to their new employer, what’s the opportunity to consolidate accounts via roll-ins?
