Over the past 40 years, 401(k)s have supplanted pensions. Now some asset managers are trying to make these retirement savings plans act more like pensions.
From 1980 through 2022, the proportion of private industry workers participating in defined benefit pension plans fell to 15% from 38%, according to the Bureau of Labor Statistics. Workers have been told instead to contribute to 401(k) plans to have a secure retirement, and most people with access to one do contribute.
The bigger challenge is what to do with these assets once they retire. Pensions gave retirees predictability—a guaranteed income stream that made it easy to understand how much they could spend. Social Security benefits provide lifetime income, but they represent just 30% of income for people 65 and over.
With longer life expectancies and unpredictable market returns, a lot of baby boomers are “feeling insecure about retirement,” says Jason Fichtner, head of the Retirement Income Institute. “They’re looking at these market cycles and asking, can I really afford to retire? How do I make sure it lasts through retirement, which could be 30 years?”
Some asset…
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