The Shift that Redefined Retirement Security

Retirement plans have been a standard feature of public and private sector employers in the United States since the early 1900s. Although Defined Benefit plans were the mainstay of most pensions plans for much of the twentieth century, there was a massive shift in the 1980s, mainly in the private sector, towards Defined Contribution plans like 401(k). The paper argues that government policies for the private sector, new employer-employee relationship, job-switching, and familiarity with the financial market created an environment where an increasing number of new-age employees are dependent on themselves rather than the employer to fund their retirement. Overdependency on Defined Contribution plans has led to inadequate savings for many American workers, jeopardizing their retirement.

Source SSRN