Most DB plan sponsors that freeze their plan want to terminate it completely someday.
Terminating the plan allows plan sponsors to:
- Pay plan participants the benefit they have earned.
- Eliminate the liability that they have had to manage as part of the plan.
There are a lot of moving pieces leading up to a DB plan termination including:
- Administrative tasks (such as participant notices, election forms, government filings, etc.),
- Plan document amendments,
- Annuity purchase decisions,
- Protecting the plan’s funding status (which is so critical to maintain during this process).
Five years ago, my firm, CREATE Research, first partnered with Principal Global Investors to examine trends within the asset-management industry. Many things have changed since 2009; one of the biggest changes has been how defined benefit and defined contribution plans have altered their approach to asset-allocation strategies. The infographic below brilliantly details how investor behaviors have shifted from “wants” to “needs” over the past five years. I encourage you to download the entire survey, entitled “Asset Allocation Leaders, Laggards, and Newcomers: 2009 – 2013.” You can read the full trends analysis and other research at create.principalglobal.com.
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Imagine you’re aboard a flight that’s on its final approach into the Indira Gandhi International Airport in Delhi, India. For most of the flight, the plane, a 787, has been traveling at about 903 km/hour (that’s around 560 miles/hour). As the flight attendants collect that last few plastic cups, the plane starts to slow and banks gently to line up with the runway. The man next to you, oddly distraught over the change in airspeed, yelps as the pitch of the engines audibly lowers. Panicking, he unbuckles his seatbelt, stands up and yells, “It’s slowing down!! Why is it slowing down?!? I’m bailing out!!”
While you’d never expect this sort of thing to actually happen on a real flight to India, something similar is happening with emerging market investors. Read more
Your retirement could span two decades or more (knock on wood), but have you considered whether your retirement savings will last? Well, your answer will depend on three things:
- How much you set aside now.
- Your withdrawal rate during retirement.
- How you invest your savings once you retire.
To stockpile enough income for retirement, most experts recommend saving between 10-15 percent of your annual pay throughout your career. If you haven’t done so, don’t give up; but start saving as much as you can, as soon as you can.
Where a lot of people get in trouble is when they try to determine a safe withdrawal rate. They retire with what seems like a lot of money in the bank; but then they start spending it, forgetting that money has to last. This might seem like a no brainer, but it’s easy to kick off retirement with lots of celebratory spending (world cruise anyone?) Read more