By Chuck Epstein
Rollovers of 401(k) assets into IRA accounts last year amounted to $324 billion, an increase of over 17 percent, according to Cerulli Associates.
None of that is expected to slow any time soon, the Boston-based global analytics firm said, a fact of life that is already posing a challenge to companies that serve the 401(k) market.
“We anticipate that IRA asset growth will continue through the remainder of the decade as defined contribution assets continue to roll into individual accounts,” Shaan Duggal, an analyst at Cerulli, said in a report.
Total IRA assets last year, Cerulli said, amounted to $6.5 trillion.
Workers are typically able to leave their savings in their company 401(k) when they retire, though many don’t. In a previous research report, Cerulli said Americans shifted $321 billion from 401(k)s and similar plans to individual retirement accounts in 2012, up about 60 percent in the past decade.
The latest data verifies a trend which has been building for decades as the shift to 401(k)s has gained greater traction among employers in response to fiduciary issues and higher pension costs.
In 1989, 62 percent of full-time private-sector workers had retirement benefits, which were divided about equally between those with defined-benefit pensions and those with defined-contribution plans, including roughly 20 percent of full-time private-sector workers who had both. By 2010, 50 percent of these workers had a defined-contribution plan and 22 percent had a defined-benefit plan, including roughly 13 percent who had both, according to data from the Economic Policy Institute.
Cerulli noted that while IRA account balances are fast-rising, so, too, is competition for rollovers.
"Firms must be creative with their marketing and adapt quickly as new sales program such as rollover cash incentives grab consumer attention," Duggal said. To attract more rollover business, Cerulli suggested that recordkeepers should invest in technology and market research that “facilitates a positive customer experience.”
“Outbound communication to participants who are changing jobs or retiring should use data that can be repackaged into making a personalized approach for their own financial condition,” Duggal suggested.
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Originally published on BenefitsPro.com