Retirement Realities
U.S. News & World Report (06/16/03) Vol. 134, No. 21 p.60; Dobbs, Lou

Many people will be unable to retire in the way they originally planned, as portfolio assets continue to show the effects of the drop-off in the technology and telecommunications sectors and the subsequent market decline. Though the stock market has shown marked improvements of late, the yearly Employee Benefit Research Institute Retirement Confidence Survey shows that almost 25 percent of people age 45 and above intend to put off retirement. Additionally, recent AARP research notes that 77 percent of 50- to 70-year-old stockholders say they have lost funds over the previous two years, and 25 percent of the losing stockholders indicate they may put off retirement or go back to work. The factors affecting the trend include the popularity of 401(k) plans and the subsequent decline in use of pension plans that derive funding from employers--which is a problem, author Anne Colamosca argues, because 401(k) plans were never meant to replace traditional pension plans, as they have at many companies. Companies probably will not return to using traditional pensions in large numbers, but some are introducing other alternatives such as the cash balance plan, which allocates all workers an account for fixed contributions from employers. Typically, these are calculated based on salary, and employers hold investment risk while employees may carry over balances to new jobs. Some older workers have concerns about losing funds in the move from conventional plans, and critics point out that cash balance plans do not provide a complete solution to the situation many aging workers face. Eric Sondergeld, corporate vice preside at LIMRA International, argues also that companies should approach retirement plans not as a burden but as a tool for drawing and retaining talent.

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