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There's a huge problem with defined contribution plans that isn't in defined benefit plans: the contributions belong to the retiree and get inherited by their c
by ThrustVectoring 9y ago
There's a huge problem with defined contribution plans that isn't in defined benefit plans: the contributions belong to the retiree and get inherited by their children, rather than helping fund seniors as a class.
Ideally you'd want some sort of tontine-like features, where people receive mortality credits based on their contributions and actuarial tables for their age. It'd mean that saving enough for retirement is much more economically feasible.
- nugget 9y agoIf you annuitize your 401k balance at retirement you're effectively participating in a Tontine-like structure with fees paid to the insurance and reinsurance companies in return for administration and risk mitigation.
- ThrustVectoring 9y agoIndexed annuities are crap, single premium inflation-indexed annuities are pretty much the ideal product but not enough people are buying it for it to be offered, and buying a flat single-premium immediate annuity has some execution problems with dealing with inflation properly. There's significant execution hurdles with this plan. And like, yeah, this solves the problem for me, but I'm already a high-income earner who is financially literate enough to reason through these things. Having it be opt-out or mandatory solves this for the people who aren't as lucky.
- walshemj 9y agoNot always until recently in the uk you could not pass on any of your pension to your kids and there are limits now ie only you die before 75.