
Contents
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The Stampede to Self‐Directed 401(k) Plans The Stampede to Self‐Directed 401(k) Plans
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Risks and Rewards of Retirement Saving in Self‐Directed 401(k) Plans Risks and Rewards of Retirement Saving in Self‐Directed 401(k) Plans
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Risk of Inadequate Saving. Risk of Inadequate Saving.
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Failure to Roll over Distributions. Failure to Roll over Distributions.
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Leakage via Loans and Hardship Withdrawals. Leakage via Loans and Hardship Withdrawals.
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Investment Risk. Investment Risk.
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Risk of Retiring Earlier Than Planned. Risk of Retiring Earlier Than Planned.
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Longevity Risk. Longevity Risk.
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Risk of Irrational Behavior. Risk of Irrational Behavior.
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Enhancing Retirement Income Security. Enhancing Retirement Income Security.
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Conclusions and Future Research Conclusions and Future Research
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Endnotes Endnotes
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Reference Reference
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4 Changing Risks Confronting Pension Participants
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Published:August 2006
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Abstract
The shift from traditional employer-sponsored defined benefit pensions towards individual-account defined contribution plans involves a reallocation of risks and rewards from plan sponsors to employees. While much has been written about the transfer of investment risk and the potential consequences of bad investment choices, less attention has been focused on other potential hazards to retirement security such as the effect of job change and other labour market factors on contribution patterns, the chance of outliving one’s accumulated assets, and the tension between encouraging participants to save for retirement while allowing access to those assets for a variety of other pressing financial needs. This chapter examines these challenges to retirement income security, and identifies several legal and policy changes that might enable participants to cope better with such changes.
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