Small Retirement Accounts: Issues and Options

The existence of small and inactive accounts is a largely inevitable feature of the US retirement saving system, which features employer-based retirement plans, individually managed accounts, and automatic enrollment. We consider the issues raised by these accounts, including the corrosive effects of fees, and the increased likelihood of pre-retirement leakage and lost accounts. We examine five sets of partial solutions: extensive reform of the rollover and account consolidation rules; enhancement of the saver’s credit; a national retirement dashboard; a default account consolidator; and creating a system with a single account for each worker. Each idea has advantages and drawbacks. Policy makers should consider these options as they contemplate reform.