Paul J. Yakoboski
Senior Research Fellow
December 2011 |
The risks associated with providing retirement income have shifted from employers to employees over the past several decades as the number of defined contribution plans, particularly 401(k) plans, have increased while the number of defined benefit plans has decreased. The 2008-09 recession along with subsequent economic turbulence has had a dramatic impact on the account balances and retirement plans of many plan participants. This has lead to growing concerns about the ability of individuals to handle this responsibility.
On June 23, 2011, TIAA-CREF and the TIAA-CREF Institute hosted a forum focused on ways to enhance DC plan design to better meet the needs of today’s workforce. Forum participants included senior human resource officials responsible for plan sponsorship at colleges, universities and non-profit hospitals.
Plan design significantly impacts the outcomes experienced by a sponsor’s employees; this can be in unintended as well as intended ways. Therefore, it is critical that the industry and employers carefully consider how to architect plans to better ensure an adequate and secure retirement income for workers. A key component of this is shifting the focus of design from wealth accumulation to providing income throughout retirement. But plan design alone cannot solve the challenge of helping employees achieve better plan outcomes. Definitive action is needed to improve financial literacy; this can happen though both education and advice.