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BEAR x BIOrg Webinar on Retirement Savings (Oct 25)

This webinar hosted by BEAR x BI-Org will too many employees cash out their retirement savings when they leave a job […]

BEAR x BI-Org Webinar Series:

Too Many Employees Cashing Out Retirement Savings at Job Separation

Yanwen Wang (University of British Columbia), Muxin Zhai (Texas State University), & John Lynch (University of Colorado-Boulder)

Wed., Oct. 25, 2023 from 9-10am PT

Despite that the US government imposes a 10% penalty to discourage pre-retirement leakage, in the data set the researchers collected of over 160,000 U.S. employees from 2014-2016, 41.4% cashed out at least part of their 401(k)s when leaving a job — and 85% of those drained their balance entirely. Why does this occur at this moment in particular, despite evidence that it can damage your ability to retire and despite warnings from experts that it’s a bad idea? The answer is a combination of bureaucracy and psychology — how cashing out is explained to employees (or automatically occurs if balances are low), and how the “composition” funds in one’s 401(k) balance matters: leakage increases with employer contribution proportion. The researchers offer suggestions for employers to nudge their departing employees toward maintaining their savings and curb avoidable leakage.

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