Press Release

Closing the Retirement Savings Gap: Innovative Insurance Protects 401(k)s During Job Transitions

Issued by Custodia Financial

Aug. 25, 2024

Dallas, TX – Millions of American workers face a significant retirement savings shortfall—a large portion stemming from workplace retirement plan loan defaults and related cashouts. 86% of employees with outstanding loans default when changing jobs and two-thirds of those cash out their entire retirement accounts. This has devastating consequences, as a single defaulted $8,500 loan for a 42-year-old can translate to over $400,000 in lost retirement savings due to missed compounding.

Tod A. Ruble, CEO and Co-Founder of Custodia Financial, emphasizes the urgency: “The current economic climate underscores the need for innovative solutions like Retirement Loan Protection℠ (RLP). Frequent job changes, economic volatility, increased layoffs, and higher interest rates threaten the financial stability of many Americans. Employers are anticipating increased loan utilization and defaults, making retirement savings protection even more critical.”

Market Opportunity

Despite exceeding $11 trillion, US Defined Contribution (DC) retirement plans have over $200 billion in unprotected 401(k) loans vulnerable to job loss defaults. Several factors highlight the need for RLP:

• Economic Uncertainty: Job mobility, inflation, and interest rate hikes all contribute to loan defaults.
• SECURE 2.0 Legislation: This new law will increase participation and contributions so may increase loan utilization.
• Rising Account Balances: Participation, contribution rates, and strong market returns are positive trends, but require protection.

Addressing Financial Wellness Challenges

Over 70% of employers offer financial wellness programs, but with limited engagement and measurement. Custodia Financial’s RLP solves for both.

Romi Garvey, Chief Growth Officer, explains, “Employers are seeking measurable financial wellness solutions. RLP, offered as an insurance solution that automatically covers the entire retirement plan, provides comprehensive protection for 401(k) or other employer-sponsored plans, ensuring participant savings remain intact. It’s a win-win: participants are not charged, and the plan-level policy creates automatic blanket coverage for all. RLP is a next-generation financial wellness program designed to measurably benefit all participants and close the retirement savings gap.”

Key Benefits of Retirement Loan Protection℠:

• Immediate availability with no technology integration or enrollment period.
• Affordable solution for plan sponsors with a seamless activation process.
• Measurable impact on participant financial security and retirement outcomes.

About Custodia Financial

Custodia Financial tackles persistent retirement savings challenges with innovative solutions. Their flagship product, Retirement Loan Protection℠, is an automated, measurable financial wellness feature that safeguards against loan defaults triggered by job loss. Custodia Financial’s pioneering program automatically repays retirement plan loans in the event of employment separation, ensuring greater financial security and better retirement outcomes for all workplace savers.

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