Most Defined Contribution Plans are not pension plans, they are savings accounts. If you want to change to a pension plan, add some additional steps. Traditional plans focus on growth. The metrics that are popular are rates of returns, asset valuation and market volatility. To convert a saver plan to a pension plan, the focus is shifted to a retirement income payouts. You will be looking at (1) life expectancy, (2) retirement income, and (3) portfolio assets. Many companies use prototype plans because they are easy to set up. But these plans may not address the issue of a pension and you may want to go back to your custodian and discuss the subject of an upgrade, or consider looking for a new custodian who has services in this area. Look at an open architecture and see if your business can handle it. Open architecture lets the clients invest not just in that custodians firm’s financial products, but also in competing firms’ financial products. The downside of open architecture is that the record keeper, investment manager(s), and custodian/directed trustee are all separate entities and are negotiated separately. But open architecture helps investors obtain better diversification and possibly reduce risk by not placing their entire future investment returns in the hands of a single investment firm and their approach. It also cuts down on retirement movement from vendor to vendor.
Retirement Planning is receiving renewed interest because the cost of living is increasing rapidly, life expectancy is increasing and healthcare is a major item in today’s environment. It is not at all unusual for the following assets to show up in the most basic retirement plans:
- Qualified Plans
- Non-Qualified plans
- Social Security
- Retail Investments
- Permanent Life Insurance
- Personal Residential Property
- Rental Property
For non-financial considerations during retirement that are added to planning, they are:
- Part time employment
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