US. 401k ‘Cashout’ Craziness Continues
In May, Retirement Clearinghouse announced the National Retirement Savings Cashout Clock, a virtual clock that calculates 2017 year-to-date cashout leakage in real time from America’s defined contribution system.
At the time it was announced, the clock had already registered $24.4 billion in cashouts. Since then, it’s added another $16 billion, and crossed the $40 billion mark in late July. As of this writing, $42.3 billion in cashouts have occurred thus far in 2017. If nothing happens to stem the flow, we’ll reach $68 billion in cashouts by year’s end.
Industry conferences often focus on participant education, financial wellness, plan design and retirement income solutions.
While important topics to be sure, there’s hardly a word about the scourge of cashout leakage, and how it works to massively undermine every one of these initiatives. Even the conversations taking place on leakage address only the tip of the leakage iceberg–loan defaults and hardship withdrawals–and not its hidden underbelly: cashouts. It was brought home in a 2009 GAO report, which illustrated that premature cashouts represented 89 percent of all retirement plan leakage.
Read More: 401 K Specialist
