Rollover Workplace Retirement Plans

Rollover Workplace Retirement Plans

Published On: September 13, 2023

Written by: Ben Atwater and Matt Malick

There are compelling reasons to consolidate your inactive (and sometimes even your active) workplace retirement plans.

The Employee Benefit Research Institute says the average 401(k) participant has 9.9 employers over the course of a career. In other words, every year 14.8 million Americans with workplace retirement plans move to new jobs. Often, as a result of this transition, plans are left behind and typically ignored.  Capitalize, a 401(k)-consolidation firm, estimates that there are 24 million left-behind 401(k)s with about $1.35 trillion in forgotten assets in the U.S.

Frequently, the process for rolling over old 401(k)s is clunky. For example, most plans still require filling out a bundle of paperwork and / or calling the custodian and verbally consenting to an intimidating “tax notice disclosure.”

After completing this, providers often only offer the option of mailing a check. These checks can fail to arrive or go unnoticed among unmarked junk mail. The custodian might make the check payable to an improper payee. Or the participant may not deposit the check in a timely manner or to the appropriate rollover account.

Not to mention that 41.4% of U.S. workers simply withdraw their money from retirement plans when they change jobs and, of those, 85% of employees completely drain their accounts, according to the UBC Sauder School of Business.

Despite these eye-opening statistics, the U.S. Department of Labor (DOL) requires registered investment advisors, like us, to supply detailed disclosures to clients rolling over their plans to our management. The DOL sees our rollover recommendation as a conflict of interest, since we assess a fee on assets we manage. By this logic, any American who provides a product or service in exchange for money has a conflict of interest, but nevertheless we encourage you to read our disclosure.

We believe that coordinating your investment strategy across all accounts is key to your retirement planning success. In addition to the basic rollover neglect we outline above, we see other compelling reasons for retirement planning consolidation, especially for high-net-worth clients, such as:

  • Broader array of investment options in the portfolio.
  • Financial planning, tax and estate planning services, and risk analysis, all integrated with your comprehensive planning.
  • Integrated investment management and asset location, allowing for strategic placement of certain assets in the most tax-advantaged accounts.
  • Cash and withdrawal management—distributions from employer plans are often pro-rata, forcing liquidation of the wrong assets at the wrong times.
  • Clean separation from a former employer as you do not wish to leave assets with them.
  • Ability to do partial Roth conversions in advance of RMDs.
  • Ability to tax-manage retirement distributions from various retirement accounts.
  • Ability to make Qualified Charitable Distributions (QCDs) after attaining age 70 and ½.
  • More timely responses to requests, questions and support.
  • Easier to change beneficiary designations, particularly regarding spouses.
  • Ability to consolidate accounts and the convenience of having all your account reporting with one provider.
If you have questions or concerns about old retirement plan assets that you may have left behind, please call or email us at your convenience.

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