Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Retirement Planning > Retirement Investing

Proactively Contacting Retirees is the Key to Keeping Their Retirement Assets

Your article was successfully shared with the contacts you provided.

A new LIMRA study revealed that retirees and pre-retirees who are proactively contacted by their retirement plan provider around the time they leave their employer are twice as likely to keep their retirement plan assets with the plan provider.

“With more than $400 billion per year rolling out of employer-sponsored retirement plans and into IRAs, plan providers are looking for ways to keep these assets under management,” said Matthew Drinkwater, associate managing director, LIMRA Retirement Research. “Our study found participants who are contacted around the time that they retire or leave their employer were much more likely to retain their money in their employer-sponsored plan account.”

Not all contact is equal, however. The study found that “active” contact methods (e.g., phone, in-person contact) that allow for personal two-way communication are more effective than “passive” methods such as postal mail or email. Plan providers should consider expanding their call center staff, rather than expanding the retention program’s mailing budget, to effectively reach out and retain plan participants.

While initial retention is important to plan providers, it doesn’t eliminate the risk of participants deciding to roll over their balances at any time. In fact, the study found that half of stay-in-plan participants were not committed to remaining in the plan and nearly 20 percent said they had not considered their alternatives yet. 

Furthermore, only 24 percent of retirees and 15 percent of pre-retirees who cashed or rolled their money out of the plan invested the money with that same plan provider. Consistent with prior LIMRA studies, mutual funds are the most commonly selected destination for rollover assets, especially among higher-balance participants. 

There are other factors that can play into whether a participant remains in their plan: 

  • Retirees and pre-retirees who have contributed to their DC plans for 20 years or more are significantly more likely than others to leave the money in the plan and remain committed to doing so.  Most of these long-tenured individuals have stronger relationships with both the employer and plan provider.
  • Former employees of education, non-profit and public-sector employers are significantly more likely than former employees of private-sector employers to leave their money in the plan. For example, among public sector workers, 50 percent of assets were retained in plan and committed as compared to private sector workers at small companies (under 100 employees), where only 14 percent of assets were retained and committed.  Among former private-sector workers, in-plan retention improves with increased employer size.
  • Individuals who left money in the plan but are not committed to keeping it there, or have rolled their money out, had lower satisfaction levels with the plan provider than those who rolled to retail products or are committed to remaining in the plan.  Plan providers that contact participants frequently and establish a positive relationship are more likely to develop a higher satisfaction rate and therefore retain more assets.
  • Individuals with financial advisors/planners are less likely to keep their assets with the provider of the employer-sponsored plan.  LIMRA recommends plan providers offer consultations with an affiliated financial professional, which, when used by a participant, improved the amount of retained and committed assets compared to those who used an independent advisor.

“Time is of the essence,” noted Drinkwater. “As we have seen in prior studies, half of all assets represented by those surveyed were distributed within 12 months.  It is critical to engage retirees and terminated pre-retirees as early as possible to have a chance of retaining their assets.” 

The survey, conducted in the spring of 2011, included 1,170 retirees and pre-retirees (aged 55-70) who terminated with their employer over the last three years, were involved in making financial decisions for the household, and had at least $10,000 in their DC plan accounts as of the time of retirement/termination.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.