The Missing Piece in 401k Retirement Income: Consolidation

According to EBRI statistics, a typical 60-year-old Boomer nearing retirement will have changed jobs almost 10 times

401k, retirement, Retirement Clearinghouse, income, baby boomersAre we closer to solving the puzzle?

As Baby Boomers retire in record numbers, they’re shifting their attention from saving for retirement to the process of decumulation, or converting their 401k savings into retirement income.

For many, their current employer wants to come to the rescue, offering a dizzying array of retirement income solutions in the 401k plan.

Unfortunately, Boomers are finding that one simple, yet critical element is missing, one that prevents them from working as intended—the consolidation of their retirement savings.

Baby Boomers, 401k plans and retirement income

Over the span of their working lives, Boomers have seen the birth of 401ks as optional, “supplemental” retirement plans grow into the primary—and often only—retirement savings plan offered by employers.

Along the way, 401k plans have developed important features that promoted one of three core goals:

  1. Participation (auto-enrollment)
  2. Saving (auto escalation)
  3. Diversification (target-date funds)

With many of these new features, participant outcomes were maximized under a default structure, where features were automatically “turned on” unless the participants acted to opt out.

Now, with the Boomer retirement wave, “decumulation” is making a strong bid to join the list of core goals. As evidence, plan sponsors have started to offer retirement income features that include both in-plan and out-of-plan offerings, managed drawdowns, guaranteed minimum benefits and so on.

Retirement income strategies can be quite complex, as early-adopting plan sponsors have learned. Optimizing retirement income is a multi-faceted problem, incorporating an array of potential variables, including assets, life expectancy, market risk, inflation, taxes, health care costs, etc.

What’s missing in the rush to replicate salary in retirement?

In the dash to decumulation, anything that makes a retirement income strategy simpler and easier to implement is a huge plus.

Fortunately, there is something every plan sponsor that’s considering a retirement income solution can do to greatly simplify this process: facilitating the consolidation of their participants’ retirement savings.


According to EBRI statistics, the typical 60-year-old Boomer nearing retirement will have changed jobs almost 10 times. Consequently, it’s not unusual for many Boomers to be managing their current 401k, plus several “stranded” 401k accounts or IRAs, all at the same time.

Aside from the incremental fees and complexity associated with managing multiple retirement savings accounts, a multi-account scenario makes the execution of a retirement income strategy extremely difficult for the participant, and virtually impossible for a plan that houses only a portion of the participant’s retirement savings.

Consolidation solves the dilemma caused by fractured retirement savings, offering participants the opportunity to get their retirement savings in one spot, making the execution of a retirement income strategy far less challenging.

Put simply, consolidation is common sense.

Implementing a consolidation program

While a default approach to consolidation would once again optimize participant outcomes, such a default does not yet exist in the retirement industry, leaving the plan sponsor to implement an “opt-in” strategy for consolidation that can still have a meaningful impact on outcomes.

Plan sponsors should consider implementing a consolidation program as a prerequisite for offering effective retirement income solutions.

Have your clients take the following steps to promote consolidation in their plan:

  1. Ensure their plan permits rollover contributions, or “roll-ins.” According to the PSCA’s 60th Annual Survey, 96 percent of 401k plan respondents indicated that their plan accepts rollovers from other qualified plans. Check your plan to find out if it does. If it doesn’t, push for the inclusion of this important plan feature.
  2. Actively promotes roll-ins, particularly at initial eligibility. Everyone, not only Boomers nearing retirement, will want to simplify their lives and save money on fees.
  3. Provide unbiased assistance for participant roll-ins. Roll-ins can be daunting transactions, if performed on a do-it-yourself basis. An unbiased, external roll-in service will typically operate on a fee-for-service basis, so that all participants—regardless of balance—will be encouraged to take advantage of your plan.  Fees can be structured on a “participant-pay” or “plan-pay” basis. Importantly, these fees, if paid for by the plan, can be considered permissible plan expenses, if the roll-in service is available to all participants. Research shows that participants will embrace this benefit. According to Boston Research Technologies 2015 Mobile Workforce study, 93 percent of participants surveyed indicated roll-in assistance was a “good” or “valuable” benefit.

If they’re serious about structuring their plan to offer a retirement income solution, they’ll also need to offer plan participants end-to-end roll-in assistance, so that consolidation is an easy option, made simple and worry-free.

Tom Hawkins is vice president of sales and marketing with Retirement Clearinghouse, and oversees all key operational aspects of this area, including RCH’s web presence, digital marketing and plan sponsor proposals. In other roles for RCH, Hawkins has performed product development, helped lead the company’s re-branding, evaluated and organized industry data and makes significant contributions to RCH thought leadership positions.

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