Moving retirement savings is about to get easier for millions of employees with small balances when they decide to switch jobs, writes Ann Carrns for The New York Times.

The goal of this change is to stem a “leakage” of savings, as it is called by retirement researchers, from 401(k)s and other workplace retirement accounts when workers change jobs.

Unlike people who have fat retirement accounts, those who have less than $5,000 often cannot leave these funds in a former employer’s plan once they no longer work there. Workers usually take out this money but never reinvest that cash, which creates a dent in their retirement savings.

Additionally, low-balance workers who cash out in the first year after leaving a job have to pay taxes and penalties from the early withdrawal.

To help find a solution for this issue, Fidelity Investments, Vanguard, and Alight Solutions, three big 401(k) administrators, have joined forces with Retirement Clearinghouse to make the process of transferring workplace retirement accounts to a new job easier.

The quartet formed the Portability Services Network to act as a hub for locating the workplace retirement account of an employee and automatically transferring the balance to a plan of the new employer. The employee does not need to do anything, the process is automatic. The network is expected to become fully operational in April.

The automatic-transfer option will most likely especially benefit minorities, women, and lower-income workers due to them usually having higher a cash-out rate when changing jobs.

According to the consortium, the goal was to “help America’s underserved and under-saved workers improve their retirement outcomes.”

And while the group does not currently include all the biggest retirement administrators, the current owners represented around half the 401(k) market in 2021.

Read more about the network in The New York Times.

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Open House: Creative Capital Wealth Management Group – RSVP Today

The first quarter of a new year offers an opportunity to evaluate how world events, politics and trends might influence and shape economic developments across the Philadelphia region and the United States.

With inflation here to stay and whispers of a global recession looming, now is the time to arm yourself with the information you need to ensure a successful 2023 for you and your business.

At 4:00 PM on the March 22, 2023, Fred Hubler, founder and Chief Wealth Strategist at Creative Capital Wealth Management Group and Greg Care, partner in the Limerick office of Maillie LLP, will share their perspective on global, national, state, and local economic trends and answer your questions about how IRS changes made in 2022 might impact your tax return in 2023.

Attendance is limited to 25 readers of the weekly Wiser Wealth column of MONTCO Today.

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