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    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 category.

    "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 decisions.

    "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.

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