For decades, Americans have saved in workplace and individual retirement accounts on a tax-deferred basis. Workers gain access to their retirement savings when they change jobs or retire. In almost all cases, workers can cash out their balances immediately, or wait until they have reached retirement to cash out whatever amounts they have accumulated in these plans. These cash-outs are subject to income taxation. But for many individuals before retirement – or even those who have retired – it makes sense to move their assets from one type of retirement account to another rather than cash out the money. This tax-qualified “money in motion” (MIM) represents an enormous amount of financial activity within the retirement market and thus a critically important opportunity for the retirement industry.
Participants’ top reasons for rolling to an IRA are: to gain control of their money, to seek better investment returns, and to consolidate assets.
Only 1 in 5 participants consider rolling their balances to companies other than the one they selected.
Unlike rollover transactions, more roll-in participants discuss their decisions with their employers than with advisors, DC plan provider call centers, or others.
Although the most common method of transferring from one IRA to another is by means of a self-directed online transaction, this method is strongly associated with younger owners; older owners typically have an advisor handle the transaction.
Matt Drinkwater, who joined LIMRA in 1999, is corporate vice president and director of retirement research within the Secure Retirement Institute (SRI). He leads a team of retirement experts responsible for developing and executing SRI’s research agenda, which covers both institutional and retail businesses.
He has led the creation of several major studies of retirement planning, retirement income planning and management, and consumer preferences for receiving advice. Drinkwater has directed several institutional retirement research projects, including studies of asset retention and the rollover market. His research on annuities has encompassed in-depth studies of product features, buyer and owner characteristics, persistency, and living benefit utilization.
He is a graduate of Trinity College (Hartford, CT) and holds a doctorate in psychology from Brown University.