Coming Up Short: The Challenge of 401(k) Plans (Google eBook)

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Brookings Institution Press, 2004 - Business & Economics - 210 pages
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As the baby boom begins to withdraw from the labor force, ensuring a secure retirement income becomes an increasingly important issue, the number of people over age 65 is expected to double by 2030. That trend will continue, accompanied by worries about stock market volatility, corporate malfeasance, a rapidly changing economy, and the viability of Social Security. In Coming Up Short, two experts on retirement policy analyze 401(k) plans, the fastest-growing type of employer-sponsored pensions and a vital source of retirement income for the American middle class.Alicia Munnell and Annika Sunden chronicle the development of 401(k) plans, now the dominant form of private pensions. In accessible language, they explain how such plans work and discuss their popularity. For employees, these plans are appealing becuase they have more control over their own retirement funds, and the plans are portable. For employers, the plans are generally less costly than defined benefit plans.Despite those advantages, there are some significant downsides to 401(k) plans. These plans shift all the risk and responsibility to employees, who must decide whether to join, how much to contribute, how to invest, whether to "cash out" when changing jobs, and how to manage their nest egg in retirement. These are difficult decisions, and while in theory 401(k)s could be an effective savings vehicle for retirement, in practice many people make mistakes at every step along the way.Com ing Up Short discusses why these mistakes are made and proposes various reforms to ensure that the aging population will have adequate retirement income. Comprehensive and up-to-date, Coming Up Short is an essential resource on 401(k) plans for financial service professionals, policymakers, academics, and individuals planning for their own retirement.

  

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Contents

Introduction
1
401k Plans and Retirement Income
15
Participation and Contributions in 401k Plans
53
Investment Decisions in 401k Plans
68
The Special Case of Company Stock
95
Leakages from 401k Plans
125
Withdrawing 401k Funds at Retirement
143
Making Pension Plans Do Their Job
172
The Regulatory Framework for Eligibility Participation Contributions and Withdrawals
183
References
190
Index
205
Copyright

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About the author (2004)

Alicia H. Munnellis the Peter F. Drucker Professor of Management Sciences at Boston College's Carroll School of Management and director of the Center for Retirement Research at Boston College. A former member of the president's Council of Economic Advisers, she has written or edited numerous books. Annika Sundén is the a research associate at the Center for Retirement Research at Boston College and a senior economist at the Swedish National Social Insurance Board.