Building a Better Retirement

Abstract

university employees participate in what is known as a defined contribution retirement plan. Such plans are often described as because they call upon employees to direct or manage their own retirement accounts. Because of the range of investment possibilities and their different levels of risk and return, these decisions can profoundly affect one's quality of life in retirement. Private industry is following the lead of institutions of higher education in moving away from old-style plans that guarantee employees a certain amount of annual payment in retirement. Under new plans similar to TIAA/CREF, there is no retirement income guarantee. What one receives will depend upon how well the investments in each personal retirement account perform. There are advantages and disadvantages to the self-directed approach for both employees and employers. The employees are fully vested, meaning they hold title to the fund assets. If employees change jobs, the funds remain invested in their names. Should the employer run into financial trouble, the employees' retirement funds are safe. If the employees are astute in investing, they may enjoy a richer retirement than that offered by a typical company-managed fund. For the