PLANADVISER - January/February 2022 - 33

Unfortunately, Stinnett says, the data show that nonretirees
who take cash-outs are unlikely to set aside their
newfound cash assets for retirement.
Although his current focus is individual wealth management,
for many years, Alex Reffett, principal and co-founder
of the advisory firm East Paces Group in Atlanta, worked on
a team that primarily managed corporate retirement plans;
in this role, he consulted with individual participants about
their retirement prospects.
" Working with so many individuals, you really saw a lot
of everything, and people would open up to you about their
financial lives, " Reffett reflects. " Frankly, I had many discussions
with individuals about the mistakes they'd made, and,
I can tell you, there are a lot of people who have regrets
about cashing out their 401(k) account, often because they
didn't realize the tax penalties they'd face. So, in that sense,
providing guidance and advice about small-account consolidation
is one of the most important things retirement plan
advisers can do to help people. "
Better Visibility, Better Outcomes
Jim Scheinberg, a managing partner with North Pier Search
Consulting in Marina Del Rey, California, points to another
issue that arises when employees neglect to consolidate
their accounts: They may receive misleading retirement
readiness calculations.
" So many people don't roll their prior plan balance into
their new employer's plan that the new plan sponsor, being
unable to capture that data when it's doing retirement readiness
forecasting, potentially leaves these folks with bad
information and a misperception about their preparedness, "
Scheinberg notes.
He says the leading recordkeepers work hard to expand
their ability to pull in external account data, whether it be
from a 401(k) plan, an IRA or even nonqualified personal
savings and investments. Without being able to do so, he says,
advisers and sponsors may get only a small piece of an individual
worker's financial picture.
" This situation can greatly reduce the projected value
of the monthly income estimate that almost every recordkeeper
is providing on its website and even on its statements, "
Scheinberg says. " If you don't have the ability to give an
accurate, holistic projection, people will either have a false,
heightened element of fear-or more likely they're going to
recognize that they're seeing only partial data. They may
discount their projection entirely, because it doesn't tell the
whole story. "
In the view of Stephanie Hunt, a retirement plan consultant
at OneDigital Retirement + Wealth in Savannah,
Georgia, recordkeepers, plan sponsors and advisers have a
duty to ensure the accuracy of retirement projections, but
the onus also falls on the individual employee. She urges
employees to engage with their current plan and provide
the information needed to create a clearer picture of their
specific needs and challenges.
" Many of the basic retirement readiness measures don't
planadviser.com January-February 2022 | 33
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PLANADVISER - January/February 2022

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