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American Academy of Actuaries' April 4, 2011, Briefing on "Understanding Retirement Risk" - Part 3





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Uploaded on Apr 14, 2011

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American Academy of Actuaries pension experts addressed the risks inherent with retirement plan designs and the implications for retirement planning and public policy in this April 4, 2011, Capitol Hill Briefing, "Pension Risk and Your Retirement: Understanding Retirement Risk and Overcoming Challenges through Public Policy Options."

Noting that half the population outlives its life expectancy but that most retirees plan for their assets to last only through their life expectancy, presenters Ethan Kra and Lane West detailed a lengthy list of risks to a safe and comfortable retirement, including investment risk, longevity risk, inflation risk, expense risk, and interest rate risk. Other threats include timing of retirement, not saving enough, not saving early enough, leakage from defined contribution (DC) plans when employees roll over savings into an IRA, and being out of the work force during a portion of one's prime earning years.

"Public policy should work to promote lifetime income," Kra explained.

Effective public policy reforms that could achieve that goal include:
• Providing incentives for workers to increase retirement savings;
• Discouraging lump sum distributions from (DC) plans and encouraging annuitization of lump sum distributions;
• Penalizing leakage of funds at the time of DC rollovers or even mandating rollovers;
• Supporting pooling of risk; and,
• Promoting lifetime income arrangements such as annuities.


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