More Than 50 Percent of 401(k) Plan Participants Cash In
A new study by Hewitt Associates, a global management consulting firm, reveals an alarming trend among 401(k) plan participants changing jobs. Could the results be an avenue for you to add value for your existing client base or offer more services in your compensation and benefits consulting practice?
The study shows that 57 percent of 401(k) plan participants cash out at the door when they leave an employer instead of rolling over the balance to their new employers' plans or IRAs. Other plan participants opt for an IRA solution (37 percent) while others roll over to a qualified plan (6 percent).
An employee with a smaller balance is more likely to cash in, but an amazing 31 percent with balances ranging from $25,001 to $50,000 and 17 percent with balances ranging from $50,001 to $100,000 have taken the money and run.
So what does this mean to you? This trend offers you the opportunity to provide financial education programs for your 401(k) plan clients and it also gives you a chance to educate your clients about the pitfalls of such decisions. Chances are, even if you have a savvy client base, those clients may have children being affected by these decisions.
Some firms offer education programs for medium and large corporations and guess what? A lot of those young professionals end up calling the firm to do their taxes and financial planning.