The Future of Retirement Plans

Collectively, Americans are woefully unprepared financially for retirement. This retirement problem actually reflects a collection of diverse issues. This paper identifies the most important ones: longevity; access; contributions; portability; behavioral mistakes; funded status; expenses; and regulation. Our research focuses on solutions for both plan sponsors and participants.To achieve success, in our view the retirement plan of the future needs these features:• Contribution levels should be high, in the range of 15% of salary each year.• The plan design should use behavioral techniques to encourage participation and raise contribution rates.• Assets should be professionally managed.• Plan assets should be portable across employers.• Longevity risk should be minimized by pooling individual participants' assets with others.• Retirement age should be deferred where feasible, increasing both savings and benefits.• Participants should be able to understand in simple terms how well prepared they are for eventual retirement