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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

Preface
Acknowledgments
Introduction
The Great American Retirement System?
Defined Benefit and Defined Contribution
The Dynamics of the Retirement Plan
Room for Improvement in the Accumulation Phase
The Right Sort of Education
Other Ways of Running Defined Contribution Plans
The Individual's Role in Decumulation
The Plan Sponsor's Role
A Final Thought: From Biggest to Best
DC Version 2.0
Coming of Age
The New Retirement Superpower
Coming Soon to a Dictionary Near You: DBization
At the Heart of Version 2.0: A Different Objective
Income Replacement
Is This the First Nail in the Coffin of Defined Contribution?
"Hold on a Second . . . "
The Dynamics of the Retirement Plan
More than You Ever Wanted to Know about Life Expectancy
What Is "Life Expectancy"?
How Life Expectancy Has Changed
But an Individual's Life Span Is Uncertain
Longevity Distributions: Let's Take a Look
What Does This Mean? and Will Longevity Improve Even More?
Retirement Is Expensive
The Goal Is a Targeted Level of Income Replacement
The Fundamental Pension Equation and the Defined Benefit System
A Simple Model of Retirement Plan Accumulation and Decumulation
Base Case Results
When to Start Saving
The Base Case May Not Be a Reliable Guide
How to Act in the Face of Uncertainty
Appendix: Further Analysis of the Uncertainty Associated with Investment Returns
Investment Returns Are All-Important
The 10/30/60 Rule
Games at a Virtual Casino
Investment Analogs
Historical Return Patterns
What Are the Lessons?
What Follows?
How Much Investment Risk Can You Tolerate?
Sustainable Spending
Lifetime Annuities
Simulations
Appendix: The Multiple
Opportunities in the Accumulation Phase
Save More
Employers with No Plan
Employees Who Do Not Enroll
Employees Who Start Saving Too Late
Employees with Low Savings Rates
Employees with Gaps in Continuous Participation
Limit Leakage
Cashing Out
Loans
Hardship Withdrawals
Invest Better
Evidence of Waste
The Importance of a Good Default Option
The "Target Date" Solution and for the Investment Experts?
Reduce Fees
The Impact of Fees
Fees for What?
Looking for Fee Leakage
Fee-Sharing Arrangements
Institutional versus Retail Fees
Active Management
Record-Keeping Fees
We Need the Right Sort of Education
Why the Waste? Because We're Only Human
Overconfidence in Retirement Planning
Behavioral Finance
Low Participation and Savings Rates
Poor Investment Results
What to Do?
Financial Education
Facts that Surprised Us
Enthusiastic Initiatives
What Exactly Can Be Taught?
Why Hasn't This Already Been Taught?
A Literate Default System
A Final Anecdote
Other Ways of Running Defined Contribution Plans
Case Study-Australia
Some Features of the Australian Defined Contribution System
Consequences for Coverage
Consequences for Adequacy
Consequences for Employer Attitudes
Lessons for the United States
Consequences for Investment Choices
Three Defined Contribution Plan Models
The Bank Savings Model
The Fund Supermarket Model
The Retirement Income Model
An Example of a Participant Statement in the Retirement Income Model
Collective Defined Contribution
The Principles
Broader Applications by the Dutch and Canadians
There's More than One Way to Skin a Cat
The Perspective of the Individual in Decumulation
The First Dial: Your Personal Spending Policy
Step One: How to Keep Score-The Current Position
Step Two: What about the Future?
Step Three: The Projected Outflow-The First Attempt to Quantify Your Spending Plan
Step Four: How Long Will Your Assets Sustain Your Spending Plan?
Checkpoint: Is There a Gap to Be Bridged?
Next Up
The Second Dial: Your Longevity Protection Policy
How an Immediate Annuity Works
The Benefit of Buying a Lifetime Annuity
Should Everyone Buy an Immediate Annuity?
Reasons Why Some People Don't Like to Buy Immediate Annuities
Fortunately . . .
Appendix: More on Annuity-Equivalent Wealth
The Third Dial: Investment Policy
A Reminder of Our Goals and Our Choices
A Framework
Taking Owner-Occupied Real Estate into Account
Many Rules of Thumb Are Just Plain Wrong
Four Wealth Zones
How Your Wealth Zone Determines Your Choices
Bequests
Product Innovation with Decumulation in Mind
Variations on the Lifetime Annuity
Longevity Protection Plus Long-Term Care Insurance
Guaranteed Minimum Withdrawal Benefits
The Longevity Pool
Advanced Life Deferred Annuities
Pure Decumulation Products
Which Type of Product Is Best?
The Plan Sponsor's Role
Defined Contribution Plan Governance
The Purpose of Defined Contribution Plan Governance
Risk Management
A Defined Contribution Plan's Purpose and Objectives
Fiduciary Duty
What Should a Prudent Expert Know-And When?
New Choices Based on New Knowledge
In Summary
Defined Contribution Plan Effectiveness
Participation Rate
Participation Delay
Employee Savings Rate
Employer Contribution Rate
Match Maximization
Participant Net Investment Return
Hardship Withdrawal Usage
Loans as Distributions
Early Withdrawals
Conclusion
The Defined Contribution Plan Sponsor's Role in Decumulation
Providing Education
Providing Access to Financial Products: In-Plan or Out-of-Plan
Design Features
Product Features
Simplicity
Parting Thought
Notes
About the Authors
Index
Table of Contents provided by Publisher. All Rights Reserved.

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The Retirement Plan Solution: The Reinvention of Defined Contribution

0470494786

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