Participants in defined contribution plans, when acting withoutthe benefit of better guidance, often make decisions that meantheir account balances suffer from loans and “leakage”—butadvisors can help to keep such lossesdown.

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That’s according to research from the December 2015 edition ofThe Cerulli Edge, which found that when participants were bettereducated regarding the high cost of loans and early withdrawals,they were far less likely to simply withdraw the funds from aretirement account when changingjobs.

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Bureau of Labor Statistics data indicate that the average workerwill change jobs 9–12 times during his lifetime.

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And while auto-enrollment and other automatedplan features help to boost retirement balances, they’re certainlynot a “true panacea” because of that job-hopping statistic—meaningthat lots of workers fall through the cracks, not just whendeciding what to do with the money from a previous employer butalso when being enrolled into a new plan at a new employer.

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“Essentially, if participants were automatically enrolled at arobust 6 percent (not currently the norm), and escalated 1 percentannually, by the time they reach the minimum recommended deferralpercentage of 10 percent, they switch jobs and start all overagain,” the report said. “Compound this deferral problem with 9–12decisions as to whether to leave the account as is, roll it over,or take a cash distribution, and all of a sudden, numerousobstacles to saving start to present themselves.”

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Cerulli recommended that not only should recordkeepers andemployers offer additional offerings, particularly regarding earlydistributions, but they should do more to educate participants onthe high cost of early distributions.

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“Either some sort of phone consultation, illustration of lostfuture value, or net takehome after taxes can do an effective jobin dissuading participants from accessing funds prematurely,” thereport said, adding, “It should be required that these transactionshappen over the phone or an online chat program, which wouldpresent significantly more roadblocks before the withdrawal or loancomes to fruition.”

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Read: 3 steps to help fix the coming retirementcrisis

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Such strategies, involving interaction with an advisor of somesort rather than an automated process, should help all employeesbut those with the most serious cash flow issues from simply takingout the money prior to retirement.

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