Preparing for Retirement
Experts give advice on preparing financially and emotionally for the retirement years.
Have a Good Retirement Plan continued...
In the 1980s, firms began to turn to defined contribution plans, which
depend upon employee and employer contributions, and the health of the stock
market. Plans such as 401(k), 403(b), and profit sharing fall in this
"The investment risk used to be borne by the employer in the defined benefit
plan. It's now being borne by the employee in the defined contribution plan,"
says Vanderhei, who is also a professor of risk, insurance and health care
management at Temple University in Philadelphia.
"Before, if an employer promised you $50,000 a year for the rest of your
life, they'd give you that $50,000 regardless of what happened to the stock
market. Now, if the stock market basically tanks, you're going to have a harder
time having sufficient retirement income than had you had a defined benefit
plan," adds Vanderhei.
Employees with defined contribution plans do have more control over their
investment portfolio, but experts like Hushbeck worry that many average workers
do not have the financial savvy or the comfort level to make investment
"Many employees are paralyzed by the choices that face them," she says.
"Everything that I see, hear, and read about happening on [Capitol] Hill
suggests that the system is becoming ever more complicated, as there are more
and more types of accounts being created or proposed."
Many workers, particularly the young and the poor, are failing to sign up in
defined contribution plans, and are thus missing out on the opportunity to save
for retirement, says Hushbeck.