While 401(k) rollovers remain a popular option for retirement savers, the process of getting them done remains considerably more difficult than other money movement processes according to a new report released today by Capitalize.
A new white paper: “Stuck in the Past: Why 401(k) Rollovers Remain Outdated and Painful,” reveals that the vast majority of savers surveyed—nearly 80%—are unable to complete a rollover unassisted. And 43% are forced to deal with a paper check.
The detailed report analyzes the significant challenges that retirement savers face when transferring their legacy employer 401(k) accounts through increasingly popular 401(k) rollovers.
According to the report, over 10 million 401(k) rollovers are estimated to occur in 2024 into employer-sponsored accounts and Individual Retirement Accounts (IRAs) representing approximately $1.1 trillion in assets. Despite significant growth in these transactions over the past decade, the rollover process remains far less digital than other transfer methods such as ACH or ACATs for brokerage accounts, with only 22% of savers able to successfully complete a rollover transaction unassisted.
New York-based Capitalize, which bills itself as the first platform to digitally locate and transfer retirement assets, and was recently recognized as being among “The Fintech 100,” CB Insights’ annual list of the 100 most promising private fintech companies in the world, conducted a detailed survey of 401(k) accountholders over the past several months. The survey considered a range of additional data sources on 401(k) rollovers, including proprietary data on its platform.
The key findings of this analysis highlight a transfer process that savers perceive as outdated and unnecessarily complex:
• 79% of savers rolling over without assistance had to make a phone call to complete their transaction.
• Workers wait almost 4 years on average after leaving a job to successfully roll over their legacy 401(k) account.
• 54% of savers did not initially know where their legacy 401(k) account was located.
• Over 43% of savers had to deal with a physical check while rolling over their account.
• The average 401(k) rollover takes almost 2 months from start to finish for an unassisted saver, compared to 5 days for ACH and 10 days for ACATs transfers, and requires significantly more manual steps.
“Our goal in sharing this data is to highlight the heavy burden placed on savers to find and consolidate their retirement accounts through the outdated 401(k) rollover process.”
Capitalize CEO Gaurav Sharma
“Our goal in sharing this data is to highlight the heavy burden placed on savers to find and consolidate their retirement accounts through the outdated 401(k) rollover process,” said Gaurav Sharma, CEO and Co-Founder of Capitalize. “This process remains a problem for many in the retirement savings system and leads to suboptimal outcomes across the board. By surfacing the struggle of savers and comparing the process to other money movement methods, we hope to encourage the industry towards a simpler and more saver-friendly transfer process.”
Since 2020, Capitalize has helped individual savers roll over nearly $3 billion in retirement assets and helped almost a million Americans find, compare, or roll over a retirement account through its digital platform.
Access the Capitalize white paper here.
SEE ALSO:
• Run on Rollovers in 2024: Cogent Syndicated Report
• The Truth About Old-School Automatic Rollovers
• Access to 401(k)s Surges Past 70 Million in 2023: Capitalize
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
