Details

The Retirement Plan Solution

The Reinvention of Defined Contribution
Wiley Finance, Band 489 1. Aufl.

von: Don Ezra, Bob Collie, Matthew X. Smith
57,99 €
Verlag:	Wiley
Format:	EPUB
Veröffentl.:	08.06.2009
ISBN/EAN:	9780470494806
Sprache:	englisch
Anzahl Seiten:	256

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Beschreibungen

Titelbeschreibung

Praise For The Retirement Plan Solution "Short, clear, complete, and always interesting. Best book on DC plans and what we should do-now." —Charles D. Ellis, author, Winning the Loser's Game "At a time when the world is in turmoil, along with retirement expectations, the authors have hit a home run. After reading this book, I have a plan. Read it for your path to retirement security." —Dallas Salisbury, President and CEO, Employee Benefit Research Institute "The Retirement Plan Solution offers a refreshing and provocative perspective on how to assess retirement needs, save to meet these needs, and manage the retirement payout process. In this time of financial turmoil, employees, plan sponsors, and financial advisors will find this highly practical resource volume both useful and humorous." —Olivia S. Mitchell, Director, Pension Research Council, Wharton School "The Retirement Plan Solution is a map to the future of 401(k) retirement plans. But it is not just a theoretical view of what could be. Instead, the authors describe the needs and trends that are already here, and then describe the changes that are developing to meet those needs. It is about the tomorrow that is happening today." —Fred Reish, Managing Director, Reish Luftman Reicher & Cohen "The respected authors have created a readable, timely, and very helpful book on all aspects of retirement planning. The suggestions are practical, the information is concise, and the book is highly recommended for anyone that is interested in sound financial planning." —Moshe A. Milevsky, PhD, Finance Professor, York University, Toronto, Canada "This is a must-read for people working in the retirement industry, as well as those who simply care about how to improve their chance of reaching a financially secure retirement. In a clear and simple fashion, the authors deliver one of the best books to date on inefficiencies in the current DC plan and potential improvements." —Peng Chen, President, Ibbotson Associates

Inhaltsverzeichnis

Preface xiii Acknowledgments xix INTRODUCTION The Great American Retirement System? 1 Defined Benefit and Defined Contribution 2 The Dynamics of the Retirement Plan 3 Room for Improvement in the Accumulation Phase 4 The Right Sort of Education 5 Other Ways of Running Defined Contribution Plans 6 The Individual’s Role in Decumulation 7 The Plan Sponsor’s Role 8 A Final Thought: From Biggest to Best 9 CHAPTER 1 DC Version 2.0 11 Coming of Age 12 The New Retirement Superpower 13 Coming Soon to a Dictionary Near You: DBization 14 At the Heart of Version 2.0: A Different Objective 15 Income Replacement 15 Is This the First Nail in the Coffin of Defined Contribution? 16 “Hold on a Second . . . ” 17 PART ONE The Dynamics of the Retirement Plan CHAPTER 2 More than You Ever Wanted to Know about Life Expectancy 21 What Is “Life Expectancy”? 21 How Life Expectancy Has Changed 22 But an Individual’s Life Span Is Uncertain 23 Longevity Distributions: Let’s Take a Look 26 What Does This Mean? 29 And Will Longevity Improve Even More? 30 CHAPTER 3 Retirement Is Expensive 31 The Goal Is a Targeted Level of Income Replacement 32 The Fundamental Pension Equation and the Defined Benefit System 33 A Simple Model of Retirement Plan Accumulation and Decumulation 34 Base Case Results 34 When to Start Saving 37 The Base Case May Not Be a Reliable Guide 38 How to Act in the Face of Uncertainty 39 Appendix: Further Analysis of the Uncertainty Associated with Investment Returns 41 CHAPTER 4 Investment Returns Are All-Important 43 The 10/30/60 Rule 44 Games at a Virtual Casino 46 Investment Analogs 48 Historical Return Patterns 49 What Are the Lessons? 52 What Follows? 54 How Much Investment Risk Can You Tolerate? 54 CHAPTER 5 Sustainable Spending 57 Lifetime Annuities 57 Simulations 58 Appendix: The Multiple 61 PART TWO Opportunities in the Accumulation Phase CHAPTER 6 Save More 65 Employers with No Plan 65 Employees Who Do Not Enroll 67 Employees Who Start Saving Too Late 69 Employees with Low Savings Rates 70 Employees with Gaps in Continuous Participation 72 CHAPTER 7 Limit Leakage 75 Cashing Out 75 Loans 76 Hardship Withdrawals 77 CHAPTER 8 Invest Better 81 Evidence of Waste 81 The Importance of a Good Default Option 83 The “Target Date” Solution 84 And for the Investment Experts? 89 CHAPTER 9 Reduce Fees 91 The Impact of Fees 91 Fees for What? 92 Looking for Fee Leakage 92 Fee-Sharing Arrangements 93 Institutional versus Retail Fees 94 Active Management 95 Record-Keeping Fees 97 PART THREE We Need the Right Sort of Education CHAPTER 10 Why the Waste? Because We’re Only Human 101 Overconfidence in Retirement Planning 101 Behavioral Finance 102 Low Participation and Savings Rates 103 Poor Investment Results 106 What to Do? 108 CHAPTER 11 Financial Education 109 Facts that Surprised Us 109 Enthusiastic Initiatives 110 What Exactly Can Be Taught? 112 Why Hasn’t This Already Been Taught? 115 A Literate Default System 115 A Final Anecdote 116 PART FOUR Other Ways of Running Defined Contribution Plans CHAPTER 12 Case Study—Australia 119 Some Features of the Australian Defined Contribution System 120 Consequences for Coverage 121 Consequences for Adequacy 122 Consequences for Employer Attitudes 123 Lessons for the United States 124 Consequences for Investment Choices 125 CHAPTER 13 Three Defined Contribution Plan Models 127 The Bank Savings Model 127 The Fund Supermarket Model 129 The Retirement Income Model 129 An Example of a Participant Statement in the Retirement Income Model 130 CHAPTER 14 Collective Defined Contribution 133 The Principles 133 Broader Applications by the Dutch and Canadians 135 There’s More than One Way to Skin a Cat 137 PART FIVE The Perspective of the Individual in Decumulation CHAPTER 15 The First Dial: Your Personal Spending Policy 141 Step One: How to Keep Score—The Current Position 142 Step Two: What about the Future? 144 Step Three: The Projected Outflow—The First Attempt to Quantify Your Spending Plan 145 Step Four: How Long Will Your Assets Sustain Your Spending Plan? 147 Checkpoint: Is There a Gap to Be Bridged? 148 Next Up 150 CHAPTER 16 The Second Dial: Your Longevity Protection Policy 151 How an Immediate Annuity Works 151 The Benefit of Buying a Lifetime Annuity 153 Should Everyone Buy an Immediate Annuity? 154 Reasons Why Some People Don’t Like to Buy Immediate Annuities 156 Fortunately . . . 157 Appendix: More on Annuity-Equivalent Wealth 157 CHAPTER 17 The Third Dial: Investment Policy 159 A Reminder of Our Goals and Our Choices 159 A Framework 160 Taking Owner-Occupied Real Estate into Account 161 Many Rules of Thumb Are Just Plain Wrong 163 Four Wealth Zones 164 How Your Wealth Zone Determines Your Choices 166 Bequests 169 CHAPTER 18 Product Innovation with Decumulation in Mind 173 Variations on the Lifetime Annuity 173 Longevity Protection Plus Long-Term Care Insurance 174 Guaranteed Minimum Withdrawal Benefits 175 The Longevity Pool 177 Advanced Life Deferred Annuities 177 Pure Decumulation Products 178 Which Type of Product Is Best? 179 PART SIX The Plan Sponsor’s Role CHAPTER 19 Defined Contribution Plan Governance 183 The Purpose of Defined Contribution Plan Governance 183 Risk Management 184 A Defined Contribution Plan’s Purpose and Objectives 185 Fiduciary Duty 186 What Should a Prudent Expert Know—And When? 189 New Choices Based on New Knowledge 189 In Summary 190 CHAPTER 20 Defined Contribution Plan Effectiveness 191 Participation Rate 193 Participation Delay 193 Employee Savings Rate 194 Employer Contribution Rate 195 Match Maximization 195 Participant Net Investment Return 196 Hardship Withdrawal Usage 198 Loans as Distributions 199 Early Withdrawals 200 Conclusion 200 CHAPTER 21 The Defined Contribution Plan Sponsor’s Role in Decumulation 201 Providing Education 202 Providing Access to Financial Products: In-Plan or Out-of-Plan 203 Design Features 204 Product Features 205 Simplicity 206 Parting Thought 206 Notes 207 About the Authors 223 Index 225

Autorenportrait

Don Ezra is a widely published author. He has won a Graham and Dodd Award from the Financial Analysts Journal, the Roger Murray Prize from the Q Group in the United States, and the Lillywhite Award of the Employee Benefit Research Institute "for extraordinary life contributions to Americans' economic security." Bob Collie has been working with defined benefit and defined contribution plans in the United Kingdom and United States for more than twenty years, playing at different times the role of actuary, investment consultant, and strategist. Matthew X. Smith has been involved with the design, implemen-tation, administration, consultation to, and asset management of defined contribution plans for over twenty-five years. He has also written and spoken widely on defined contribution topics.