The treatment of investment risk in corporate pension plans probably is the least satisfactory area in the establishment of investment objectives. In spite of all the work published on risk in the investment literature of the past several years, risk tolerance often is not specified in setting investment objectives. Sometimes, statements of risk are made in general terms (e.g., the fund should not suffer a loss in any designated period) or a maximum tolerable decline in asset value is specified. Such specifications of risk are very difficult for an investment manager to deal with. (more…)

In later years, many employers have also turned to outside investment product providers and offer their services either parallel to or instead of the insurance products provided by TIAA-CREF. If you choose one of these investment products, you will not be contributing to an Retirement Annuity. You will have a separate account with the investment firm, but it will exist within the overarching structure of your employer’s retirement plan. Your employer may choose to allocate all matches to an accumulation in a TIAA-CREF Retirement Annuity, or it may choose to contribute the match to your account with the alternative investment provider. Again, this is depends on how your employer has constructed the plan. (more…)

Still other decisions must be made about pension plans. The retirement age must be decided, and consideration must be given to provisions for advantages of early retirement and the resulting adjustment of benefits. Employees by law may work beyond age 65 until they have 10 years of participation in the plan.

When a retirement plan provides that a participant may take his benefits in the form of an annuity, (more…)

A defined benefit plan is the granddaddy of retirement plans. Unfortunately, in the years to come, these plans will likely become the retirement equivalent of a dinosaur. In a defined benefit plan, as noted earlier, an employee’s years of loyal service are rewarded with the continuation of income post retirement based on a predetermined formula defined by the company. These formulas vary from company to company, so if you’re covered by a defined benefit plan, be certain to ask your human resources department to provide you with the information you need to review your benefits. (more…)

It’s remarkable how pervasive the relatively recent notion of retirement has become. Retirement as we now know it didn’t exist prior to the 1930s. Social Security was developed and promoted by President Franklin D. Roosevelt and his New Dealers as a way to convince older workers to retire in order to open up jobs for young people during the Great Depression. Since then Social Security benefits have been expanded dramatically. (more…)