Automatic 401(k) Rollovers Significantly Reduce Cash-Out Rates but Face Low Plan Adoption
New research from Vanguard indicates that the Portability Services Network is successfully reducing the rate at which workers cash out small retirement accounts. For participants with balances under $1,000, cash-out rates dropped from 50% to 9% following the adoption of automatic portability. Similarly, those with balances between $1,000 and $7,000 saw a decrease in cash-outs from 39% to 31%. Despite this success in preventing immediate liquidations, the system faces a significant bottleneck: only 6% of accounts transferred into interim IRAs have successfully reached a new employer's plan as of early 2026. This is primarily due to low participation rates among plan sponsors. Currently, approximately 1.22 million eligible participants are waiting in interim IRAs for their new employers to join the network.
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Topics: 401(k) portability cash-out rates financial research retirement savings