It’d be nice if they made up their mind. First we’re told portability is key, and to take your retirement savings when moving on from an employer. Now, however, said employers are doing all they can to retain the assets of their former employees.
The reason? The sheer size of the baby boomer demographic has many worried their retirement will make it more difficult for plan sponsors to hit breakpoints and negotiate lower fees.
The Wall Street Journal reports “companies from International Paper Co. to United Technologies Corp. are increasingly urging employees to keep their nest eggs in their corporate plans when they change jobs or retire. The shift is turning companies and their plan managers into big—and unexpected—competitors for the business of overseeing retirees’ money.”
According to the paper, the change is being driven by the shifting economics of retirement as baby boomers wrap up their working lives.
“Companies are worried that trillions of dollars of assets could be yanked out of their 401(k) plans as that demographic bubble moves on, hurting their leverage to negotiate lower fees with the outside money managers that run their retirement-savings plans.”
The move also fits with a broader effort by companies to improve the terms of their plans and “cajole their employees to do a better job of saving. The goal is ensuring that older, relatively expensive workers can afford to retire and make room for younger hires.”
“Why do employers care? It’s a labor cost issue,” Marina Edwards, a senior consultant at Willis Towers Watson, which works with large companies on their retirement benefits, told the Journal.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.
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