American employers are urging employees to keep savings in their corporate plans when they leave the company or retire.
The move fits with an effort by companies to improve the terms of their plans and to encourage more workers to save. The goal is to ensure that older workers can afford to retire, which makes room for younger hires.
A huge pool of money is at stake. Baby boomers now in their 50s and 60s hold about $4 trillion in defined-contribution retirement plans, according to The Wall Street Journal. Some companies say that in 2013, for the first time, 401(k) withdrawals exceeded contributions.
Companies like International Paper tell employees that it’s easier and cheaper to keep their money in the company fund. Robert Hunkeler, V.P. of investments, says it costs workers just 0.45 percent of assets when they stay in the company’s 401(k) plan. By comparison, he estimates that it would cost 1.5 percent if withdrawn and invested elsewhere.
Financial advisors, who have been eyeing an influx of baby boomer wealth, stand to lose business and fees if companies succeed in persuading employees to leave their savings with their companies when they leave.
More than a third of American households with people age 50 to 64 have saved nothing for retirement.
