September 2014, BOSTON. According to new research from global analytics firm Cerulli Associates, approximately $720 billion of defined contribution assets that were eligible for distribution remained in an employer-sponsored plan in 2013.
"The assets that remained in employer-sponsored plans are nearly twice as large as the amount that rolled out," states Chris Nadai, senior analyst at Cerulli. "Of these assets that remained in plan, the majority was rolled out to either an IRA or a new employer plan, and the rest was taken as a cash distribution to initiate an indirect rollover, satisfy a required minimum distribution (RMD), or for cash."
In the Evolution of the Retirement Investor 2014: Understanding 401(k) Participant Behavior and Trends in IRAs, Rollovers, and Retirement Income report, Cerulli examines retirement decisions made by individual investors throughout their retirement planning lifecycle, with particular emphasis on 401(k) plan participants, IRAs and rollovers, and retirement income. The report profiles these individuals and allows firms to develop strategies aimed at capturing assets earmarked for retirement.
"The fact that a majority of assets eligible for distribution remain in plan each year indicates that many 401(k) participants are hesitant to take action with their prior accounts," Nadai explains. "This is a great opportunity for financial advisors and recordkeepers to inquire about prior employment history in order to determine whether there are abandoned accounts."
Cerulli expects that annual IRA rollover contributions will increase over the next five years. This represents a large opportunity for recordkeepers, brokerage firms, and advisors, as the wave of 10,000 Baby Boomers (age 65+) retiring per day continues for the next 15 years, and these funds are put into motion.
"Establishing a relationship with retirement plan participants is essential for recordkeepers and IRA providers," Nadai continues. "One of the major advantages recordkeepers have in capturing rollovers is that they can be in immediate contact with a participant when there is a change in their work or personal life."